Over the coming years, in a bid to reach the Government’s target to reduce emissions to net-zero by 2050, there will be more requirements that commercial landlords must keep up to speed with.
From the 1st April 2023, all non-domestic rented buildings were required to have a valid Energy Performance Certificate (EPC) with a rating of ‘E’ or above. This will apply to any existing leases, even where there has been no tenancy renewal or extension as well as newly granted leases. There are some exceptions to these new rules, for example leases for a term of 99 years or more or a term not exceeding 6 months. For all other existing commercial leases, it will be unlaw for the landlord to continue to let the property where the property has an EPC rating of F or G.
The Government has already consulted on a number of other changes to legislation and whether you own or rent a commercial building, it is important to make sure that you are compliant and mindful of the upcoming anticipated changes.
Key Dates to be Aware of
1 April 2025 – Landlords must submit a valid EPC for every let property to a Private Rented Sector compliance and exemption database..
1 April 2027 – The minimum standard raised to EPC rating ‘C’ unless exempt.
1 April 2028 – Landlords must again submit a valid EPC to the Private Rented Sector database.
1 April 2030 – The minimum standard raised to EPC rating ‘B’ unless exempt.
How to Prepare for the Changes
Your first step is to check who is responsible. This usually falls to the landlord or property owner, however, it is key to check the wording of your lease agreements to make sure, as the responsibility may have been passed onto the tenant of the building.
Make sure that you have a valid, up-to-date certificate. These are valid for 10 years. Ensure that you store your EPC safely so that it can be easily produced when required. Copies should also be provided to any new leases as and when they commence.
If your certificate has expired or is close to expiry, organise for a new assessment to be carried out ASAP. You can find a local, accredited provider by putting your postcode into the website below:
https://www.theepcregister.co.uk/
If you rent your commercial property out, then carefully check the terms of your lease to see if any costs incurred can be recovered from the tenant, or if the full responsibility lies with you.
Tenants should make themselves aware to avoid any surprise charges for energy improvements over the coming years. If the landlord is passing on any costs, these should be clear, fair, reasonable, and detailed within your contracts.
Improving Your EPC Rating
There are a number of ways that you can reduce the energy use (and sometimes overhead costs) in your commercial property. You could undergo an assessment by an expert to put together an action plan of the key improvements to make, or you could review the points below to get your started.
- Upgrade the lighting to LED light bulbs which improve efficiency, need replacing less frequently and are more aesthetic to work under.
- Check the insulation to the roof and walls.
- Invest in double or triple glazed windows.
- Repair any damage to the walls, roof or entrances to avoid losing heat in the Winter.
- Upgrade the boiler – an old, under performing boiler can drag down the property’s EPC.
- Install a smart meter to gain a better insight into where energy is being used most.
- Consider renewable energy, solar panels, underfloor heating or wind power – this may seem expensive, but there are green grants available and making the investment now, will mean you could jump to a very high EPC rating and no longer need to worry about being compliant and create a forward-thinking commercial building that is highly desirable to future tenants.
- Seek expert advice from your energy provider or a surveyor.
What are the Exemptions?
You do not need an Energy Performance Certificate is you can demonstrate that the building is:
- Listed or officially protected and making adjustments would unacceptably alter it.
- A temporary building that is going to be used for less than 2 years.
- A place of worship or religious activities.
- An industrial or agricultural building that uses low amounts of energy. For example, barns, stables or units without electricity or heating.
- A detached building with less than 50 square meters of floor space.
- Due to be demolished (with planning permission)
Note that any exemption must be registered on the Register for the landlord to be able to rely on it.
Green Leases
With many businesses now focused on improving their carbon footprint, energy emissions or wanting to go beyond the standard regulations, having a ‘green lease’ is becoming increasingly popular.
A Green Lease includes environmental responsibilities and duties for both the landlord and the tenant as part of their usual lease terms with the joint aim of making the premises more sustainable and energy efficient.
This could include improving the recycling facilities, managing the water use, only using sustainable materials on repairs and improvements, or pledging to use energy efficient lighting or equipment.
If you are considering creating a Green Lease, it is important that both parties agree to fulfil their side. It should also be crystal clear who is responsible for covering the costs or maintenance required.
Beware of Non-Compliance
In order to help the UK Government meet their ambitious targets of being net-zero by 2050, strict penalties are in place to ensure that commercial landlords or property owners are compliant.
It is now unlawful to grant a new lease of a commercial property with an EPC rating of less than ‘E’. If a landlord continues to let a sub-standard property, then they will be in breach of the regulations and could face a fine of up to £150,000 if they continue without action. Their name will also be placed on a public register giving details of the breach they incurred.
Commercial Property Legal Advice
If you are in need of some guidance or help with a commercial property transaction, then please get in touch with our experienced and friendly Commercial Property Law Team.
Whether you need a lease renewing, are signing a new agreement on a premises or are looking to buy, sell or transfer your commercial property, our team are on hand.
Call us on 01256 844888, email enquiries@lambbrooks.com or speak to our online chat assistant – who is a real person, not a robot, who will take some initial details and arrange for someone to get back to you.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.