Attention Commercial Landlords – EPC and MEES regulations are tightening from 1 April 2023 – are you prepared?
The Government is working towards its goal of reaching net zero by 2050. In an effort to achieve this, 1 April 2023 will see in tighter rules surrounding Energy Performance Certificates (EPCs) and Minimum Energy Efficiency Standards (MEES) for commercial properties. Failure to comply can lead to substantial penalties for landlords.
The current EPC position
At present, commercial landlords cannot grant a lease to a new or an existing tenant if the property has an EPC rating of F or G.
What is the EPC change for 2023?
As of 1 April 2023, it will be an offence for a commercial landlord to continue to rent out a property that has an EPC rating of F or G. Landlords can commission an updated EPC to identify whether their property is in breach.
What are the penalties for breaches?
For breaches of less than 3 months, the penalty can fall anywhere between £5,000 to 10% of the property’s rateable value, capped at £10,000.
For breaches over 3 months, the penalty will be the higher of £10,000 or 20% of the property’s rateable value.
Are you exempt from the EPC change?
There are several exemptions which may apply to your lease. These include:
Term of the lease
Your lease will be exempt if it is for a term of:
- 6 months or less; or
- More than 99 years.
Refused consent from the Tenant or Local Authority
If you require the Tenant’s consent to carry out improvement works to the property and that consent has been refused or granted subject to a condition that you cannot reasonably meet, you qualify for an exemption. The same applies if consent is refused by a Local Authority.
Reduction in value of the property
If the property requires improvement to achieve a satisfactory rating, but the works would result in a reduction in the value of the property by 5% or more, you may fall under the exemption.
In order to satisfy this, you would need a report by an independent surveyor showing the projected drop in value.
The Green Deal’s Golden Rule
You will be exempt if you have carried out all cost-effective energy efficiency improvements under the Golden Rule from the Green Deal.
Future changes EPC ratings
Landlords should be mindful that in April 2027, the next phase of the action plan towards net zero, will be implemented. The minimum EPC standard will likely increase from an E to a C rating and B, or better, by 2030.
How Moore Barlow can help
Our talented team of commercial property solicitors can be with you every step of the way, whether you are taking on a lease or need help managing your commercial property. If you have any queries arising from this article, please get in touch with our Commercial property team.