By Ellie Stansfield, Solicitor at Blacks Solicitors
Since 2012, there has been a legal requirement that an energy performance certificate (“EPC”) must be in place prior to the sale or letting of a commercial property. Ultimately, it has been the responsibility of the landlord or seller to organise this prior to the property going on the market. For context, an EPC rates a property based on its energy efficiency, giving the property a rating of ‘A’ – ‘G’ (‘A’ being very efficient and ‘G’ being very inefficient).
EPC requirements changed in 2018 when the government introduced a minimum energy rating which a property had to meet in order for it to be sold or let. From 2018, it became unlawful for a landlord to grant a new lease of a property with an energy rating of ‘F’ or less. Whilst this forced the hands of landlords with regard to new leases, it remained lawful for landlords to continue to let properties with an energy rating of ‘F’ or less if the lease was entered into prior to 2018.
On the 1st April 2023, this changed. Not only is it now unlawful for landlords to grant new commercial leases in relation to properties with a rating of ‘F’ or less, it is now also unlawful for landlords to continue to let a commercial property with a rating of ‘F’ or less. The main implication of this is that the requirement applies retroactively to all commercial leases across the board. This means that landlords may now have an obligation to carry out energy improvement works on their commercial property in order to demonstrate an EPC rating of ‘E’ or above. These works could be extensive and costly, with the potential to dramatically affect both landlord and tenant.
There is, however, a potential exemption which exists. Commercial leases may not contain provisions which allow landlords an automatic right of entry for energy improvement works. Often leases are drafted to require a tenant’s consent in order for a landlord to enter the property to carry out works. Therefore, in the event that a landlord requests a tenant’s consent in order for the landlord to enter the property to carry out energy improvement works, and the tenant refuses to give that consent, a landlord may be able to register a ‘consent exemption’.
Exemptions may also be available to landlords where the necessary energy improvement works would affect the character or status of a property (i.e. in the case of listed buildings), and where a landlord has completed all of the relevant remedial work suggested by an inspector, and the property still has an energy rating of ‘F’ or below.
Ultimately, it is crucial for landlords and their representatives to be aware of the changes in in relation to EPC requirements and how it may affect commercial property. Remedial work may have substantial cost implications for landlords of properties which require significant improvement. It is also worth noting that a 2021 consultation proposed raising the minimum standard of commercial properties to an energy rating of ‘C’ in 2027. Therefore, it may be unwise for landlords and their representatives to consider an energy rating of ‘E’ or above the end of the road – instead a keen eye should be kept on the horizon.