Commercial property landlords will be aware of the importance of an EPC (Energy Performance Certificate) on their building and the impact it can potentially have on lettings. Currently, it is a legal requirement that commercial buildings must have a rating of at least an E before a new or renewal lease can be granted.
However, from 1 April 2023 this requirement will be extended to both new and existing leases. What this means is that landlords will not be able to continue letting or sub-letting a commercial property with an EPC rating of less than E.
The government have estimated that around 18% of commercial properties have an EPC rating within the F and G brackets.
What does this mean for landlords?
These changes may have a significant impact on some landlords, as it could impact their ability to let or continue to let such properties. It could also impact rent reviews as well.
Owners of commercial properties should look at their portfolio and assess the following:
- The current EPC rating.
- Identify any commercial properties with an EPC rating of F or G that will continue to be after the 1 April 2023.
- Any marginal properties that could be at risk which have a rating of D or E.
- Consider any necessary energy efficiency improvements.
- The costs of these energy efficient improvements and whether these can be passed directly to the tenant via service charge. This would also require checking over the leases of the properties.
What can happen if a landlord does not comply with the new EPC regulations?
It is important that landlords are aware of the risks that are associated with not complying with the new regulations. The penalty of not complying is based on the property’s relatable value and can carry a maximum charge of £150,000.
If possible, landlords should try and plan for the longer term as well. The Government is keen to implement ambitious energy efficiency targets for the future in order to meet their net zero emissions by 2050. The 2020 Energy white paper indicated that all commercial properties would be required to achieve an EPC rating of at least B by 2030.
However, more sooner than that landlords should expect another change in the EPC ratings from Band E to Band D by April 2024. It is advised that landlords consider protecting their property for these future energy targets. This can be done by making the improvements to Band D as soon as possible, that way your EPC will be valid beyond April next year and in 2024.
Do you need assistance with your commercial property portfolio? Why not get in touch with our property professionals who can help with the marketing and renewal of your rental property. Give us a call on 01332 292825.