In the current climate, energy efficiency has risen up the priority list for many property owners and potential buyers to try and save on the ever-rising fuel costs. The position is shortly to become more critical to commercial landlords as the incoming Minimum Energy Efficiency Standards (MEES) regulations mean energy efficiency of buildings will go from a preference to a legal requirement for many.
Energy efficiency and commercial landlords
An Energy Performance Certificate (EPC) sets out the energy efficiency rating of a property and contains recommendations on how this can be improved. All buildings, domestic and non-domestic, which have been sold, let or constructed since 2008 must have a valid EPC. This has to be updated if the property is altered in particular ways (e.g. changes to the heating system, installation of double-glazing etc).
The rating is based on several factors including the construction of the property and the lighting used inside. A qualified Non-Domestic Energy Assessor will examine the building and provide a grade on a scale of A-G with A being the most efficient and G being the least.
When is an Energy Performance Certificate not required?
An EPC is not currently required for a listed building or a building within a conservation area when it is sold or let in so far as compliance with minimum energy performance requirements would unacceptably alter its character or appearance.
What are the current regulations and when do they change?
Under the current regulations, a minimum standard of Band E is required and it is unlawful to start a new tenancy of a property which does not meet this requirement, subject to qualifying for an exemption such as the improvement works exceeding the cap of £3,500 to meet the minimum requirement or where works would damage or devalue the property.
However, from April 2023, this requirement is being extended to all existing lettings, making it unlawful to continue to let a premises with an energy rating below Band E.
The Government have estimated there are only around 15% of non-domestic let buildings which are below this level currently but those found to ignore the requirement without a valid exemption will face substantial fines, with the most serious breaches attracting fines of up to £150,000.
What other implications will the new regulations have?
The new regulations will also change the trigger for requiring an EPC. Currently, the requirement for an EPC is triggered at the point of letting and the EPC is valid for 10 years after which it expires and a new EPC is not then required until the property is re-let. The new proposals will see a building requiring a valid EPC at all times throughout the course of any tenancy.
In terms of the future regulations, it is proposed that the minimum threshold of Band B is achieved for all commercial lets by 2030, with landlords being required to obtain an EPC showing their property has improved to at least a Band C by 2027 or having achieved the best available rating taking a reasonable view as to cost. Whilst the expense of improvement works may not be a priority, it will need to move up the list as these requirements are only heading in one direction as the Government continue to strive to become carbon neutral.