Originally introduced in 2007 and made mandatory in the following year, Energy Performance Certificates (EPCs) were designed to help improve the energy efficiency of both residential and commercial private rented properties.
Measured on a scale from A (very efficient) to G (inefficient), EPCs reveal how energy efficient a given building is, how costly it will be to heat and light, and what its carbon dioxide emissions are likely to be.
A property is considered to be below the minimum level of energy efficiency, and therefore defined as ‘sub-standard’, if there is a valid EPC which has a rating of either F or G. The EPC regime has continued to evolve in light of the ever-stronger focus on environmental and energy-related matters that government, regulators and property owners all have, and there have been some important changes in recent years.
Since 1 April 2018, landlords have no longer been allowed, with certain exemptions, to let any substandard non-domestic properties to new tenants, or renew or extend existing tenancy agreements with existing tenants if they have an EPC rating below E. The rules around renewing or extending an existing tenancy of a sub-standard property are still a bit grey, but we would very much recommend that an EPC is still put in place regardless.
Similarly, from 1 April 2020, property owners were no longer allowed to continue to let a substandard domestic property to existing tenants – and there is now a third important deadline looming on the horizon which is of particular importance to commercial landlords. From 1 April next year, landlords will no longer be allowed to continue to let a sub-standard commercial property to existing tenants, meaning that they will have to invest whatever is required to bring the property up to the required energy efficiency standards or be forced to end the rental agreement.
Given that they would not be able to rent the building out again without improving its EPC rating anyway, there is a clear imperative for landlords to take action sooner rather than later on such matters. Given the amount of commercial space available at the moment in what is definitely a buyers’ market, tenants may well have multiple other options if their present premises aren’t brought up to the standard they have a right to expect. On the other hand, the cost of any work required is a one-off investment for the landlord which could provide longer-term benefits in relation to the additional value that might be realised from current and future tenants’ occupation of a more desirable property. Unless they can claim an exemption, commercial landlords must be able to show that, after the forthcoming deadline, sufficient improvements have been made and the property is no longer sub-standard if they wish to continue to let it.
If all of the relevant improvements have been made and the property is still substandard, the landlord must register this on the PRS Exemptions Register and continue to rent it out. Arranging an EPC assessment and getting the new certificate isn’t a time-consuming or costly process, and if everything is in place, it can probably be completed in no more than a couple of weeks.
But even though the deadline for bringing substandard commercial properties up to scratch is many months away, any landlords who know that work is required on their buildings would be wise to try to get it done sooner rather than later, if for no other reason that finding people to do the job may be harder than you think.
With the present boom in construction, the consequent high demand for skilled tradespeople and the supply chain issues that are currently impacting on almost every industry, it could be many months before the people you need to get your jobs done are available and able to do so, which could see the 1 April 2023 deadline getting rather too close for comfort
