EPCs for Commercial Buildings: What You Need to Know for 2023

January 24, 2022

By Sarah Price

As most commercial property owners now know, the EPC (Environmental Performance Certificate) rating of a building can have important implications for lettings. Since April 2018- subject to certain exemptions- it has been a legal requirement under the Minimum Energy Efficiency Standard regulations that a commercial building must have a rating of at least E before a new or renewal lease can be granted.  Failure to comply risks a fine of between £5,000 to £150,000 for the landlord, and also the risk of the breach being publicised on the PRS Exemptions Register.

However, with effect from April 2023 – a date that once seemed far away but is now fast approaching – this requirement will be extended to apply to both new and existing leases. Landlords who continue to let a non-exempt commercial property with a rating of less than E will be in breach of the regulations.

Commercial property owners should consider beginning the following steps now:

1. Check your EPC ratings: carry out an audit of your current EPC ratings, and their dates of expiry. Certificates are generally valid for 10 years unless there’s been a substantial change to the building. If you do not have a copy of your certificate, you can check via a search on the public register of EPC certificates here: Find an energy certificate – GOV.UK (www.gov.uk)

2. Clarify if the regulations apply to your building or lease. Whilst most commercial properties and lettings are affected, some are exempt e.g. listed buildings (provided that it can be established that the energy improvements would unacceptably alter their character or appearance) or properties that are let for less than 6 months or more than 99 years.

3. If you are concerned that your property has a low rating, consider if you can rely on one of the exemptions from carrying out improvements.  Broadly, these include:

   • all possible energy efficiency improvements have already been carried out, or there are none that can be made;

   • the landlord cannot get the consent needed from its tenant or another relevant party to carry out the improvements;

   • the improvements would devalue the market value of the property.

   • The exact requirements of the exemption being relied on would need to be met and in each case the exemption must be registered on the PRS Exemptions Register.

4. If it is likely you will need to increase the EPC rating for April 2023, take professional advice from a surveyor or building consultant in good time and make an action plan for energy improvements, such as implementing green lease provisions (read more about sustainable leases here).

5. If you can, plan for the longer term. The Government has made clear that they are keen to introduce ambitious energy efficiency targets. The 2020 Energy white paper indicated that all commercial properties would be required to achieve an EPC rating of at least B by 2030. A consultation issued last year set out a proposed framework for meeting that, suggesting that an interim target of C rating by 2027 may be required.

If you would like advice about the above or a related matter, get in touch with Sarah Price on sprice@darwingray.com, or call on 029 2082 9105 for a free, no obligation conversation.