Minimum Energy Efficiency Standards and Commercial Property

Energy used to power non-domestic buildings in the UK accounts for 12% of the country’s carbon emissions. It represents one of many challenges our government faces if we are to meet our legally binding carbon targets in 2025 and 2030 under the Paris agreement or, further, the government’s previously pledged (but not yet binding) target to reduce our emissions to “net zero” by 2050.

The Minimum Energy Efficiency Standard, as set by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, is the government’s attempt to target property in an attempt to further reduce our carbon emissions. This article is concerned with their affect on commercial property.

THEIR TARGET:

Commercial property landlords; properties let on licence or ‘agreement for lease’ arrangements are unlikely to be caught, nor are properties let for a term not exceeding 6 months (unless the agreement includes provisions to extend the term beyond 6 months or the tenant has already been in continuous occupation for at least 12 months) or terms granted for more than 99 years. Tenants intending to sub-let should also be wary as they assume the role of commercial landlord. ​

KEY DATES:

From 1 April 2018, landlords may not grant a tenancy to a new or existing tenant, including lease renewals, if their property has an EPC rating of band F or G. From 1 April 2023, landlords must not continue to let a non-domestic property which is already let if that property has an EPC rating of band F or G, therefore targeting all commercial leases with an unexpired term or even where there is a period of holding over. ​

CHALLENGES:

If landlords wish to continue to let its property and it has an EPC rating of band F or G, energy efficiency improvements shall need to be made. There are exceptions, and there are circumstances where an EPC may not be required, so it is therefore advised that commercial landlords evaluate their stock and seek legal advice well in advance of 1 April 2023 to ensure they negate any potential liability. ​

ENFORCEMENT

Enforcement has been delegated to local authorities who are sure to utilise such powers in light of the potential fines available to them and ever decreasing local authority budgets. Local authorities have the power to issue compliance notices and, if satisfied that there has been a breach of the regulations, penalty notices, including the imposition of financial penalties which commercial landlords will be keen to avoid. ​

MORE INFORMATION 

Here at Pinney Talfourd, we have a Commercial Property team who will be happy to consult with you about your commercial property portfolio and give you guidance where required. It is important you consider the impact of the regulations and any alterations required before 1 April 2023 to ensure you do not fall foul of the legislation as said date passes. For more information and advice please call on 01708 229444 or email us using our contact form.

This article was written by Ben Hersom, Solicitor at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of August 2018.