Energy Performance Certificates relating to Commercial Property
For so long Energy Performance Certificates (EPCs) were little more than coloured paperwork forming part of a conveyancing transaction. Imperious yes, as not providing one is an offence with a penalty ranging between £500 and £5,000 but nevertheless the information they contained was often merely glanced at.
This is all set to change from 1 April 2018 with regulations that require commercial properties being leased to have a minimum EPC rating of E. Landlords that rent out property with a rating of F or G could face a fine of up to £150,000.
Will this apply to my property?
EPCs are required for the majority of commercial premises. There are exceptions, including the following examples, but most offices and industrial buildings will be caught:
- Properties with no roof, or with no walls (i.e. multi-storey car park with open sides)
- Places of worship
- Temporary buildings (less than 2 years anticipated usage)
- Detached buildings with less than 50m2 floor area
- Certain listed buildings
- Buildings due to be demolished
- Properties that use no energy to condition the indoor climate
What can I do?
First and foremost if you already have an EPC for your property take a moment to review it. They last for a period of 10 years from the day of issue unless it has been replaced by a more recent EPC in which case it is the latter EPC that is valid. If the EPC has an efficiency rating of A – E then you can breathe a sigh of relief. If not, and you anticipate letting the property or renewing an existing lease of the property after 1 April 2018 you should start looking now to make improvements.
Many landlords will be able to improve the efficiency of their property by making relatively minor changes such as removing portable heaters, and indeed an EPC will contain recommendations as to what improvements can be made and what energy rating that the property can be increased to. Advice should be taken as to what changes could or should be made. If larger scale changes are required financing may be available for energy improvements.
Commercial properties are varied and cover a wide range of uses. As such an EPC provider may take longer to assess a property than a straightforward residential property and it would be wise to take action now and assess your property to ensure it falls within the requirements before the deadline of 1 April 2018.
The implication of failing to comply
From 1 April 2018 landlords will not be able to grant new tenancies or renew existing tenancies unless the building has less than the minimum rating of E. The penalties for doing so for a period of 3 months or less will carry a penalty equivalent to 10% of the property’s rateable value subject to a minimum of £5,000 and a maximum of £50,000. For a period over 3 months the penalty is 20% of the property’s rateable value with a minimum of £10,000 and a maximum of £150,000.
Finally it will be worth bearing in mind that from 1 April 2023 landlords must not continue to let any properties that have a rating below E unless an exemption has been registered.
For advice on any of these issues, please contact Stephen Stewart in our Commercial Property team on 01992 300333.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.