The requirement for (almost) all properties to have an EPC rating (or an exemption) has been around for a while now, with the initial requirements being brought in 2018. That saw a ban on letting out “sub-standard” domestic and non-domestic property. After an update in the domestic sector in 2020 which saw the continued letting of a sub-standard property made illegal, the same changes are now set to take effect for non-domestic properties from 1st April 2023.
What is sub-standard?
At the moment, any property with an EPC rating below ‘E’ (not including ‘E’) is considered to be sub-standard. Currently therefore a commercial property must have a rating of ‘E’ or higher for an owner to grant a new tenancy of that Property. It’s worth noting that the government aims to raise this to a minimum of ‘B’ by 2030.
What do the new changes mean?
Well, they aren’t new – they were just delayed. It was always the governments intention to make properties more energy efficient so it can meet its carbon targets, but they understood that some properties would need sweeping and fundamental structural changes to comply.
So, as from 1st April 2023, it will now be unlawful to continue letting a commercial property that has an EPC rating of less than ‘E’, and that will apply regardless of when the lease was granted.
As a Landlord of tenanted commercial property, you are responsible for the EPC rating of the property and ensuring it meets the minimum lawful standard. It’s therefore imperative that you take stock of your portfolio, identify any EPC ratings that must be improved and act now to instigate a program of works to bring that EPC rating up, if possible.
My property is a listed building, I’m exempt from the EPC regulations, right?
No! The legislation does not grant an automatic exemption to listed buildings. What it does do, is says that if alterations cannot be made because it would unacceptably alter their character or appearance, then a partial exemption is granted.
A range of other exemptions are available for all buildings but be aware that these still must be lodged on the PRS Exemptions Register, and are generally only valid for a period of 5 years and do not transfer to a new owner of the property.
What is the risk of failing to comply with the regulations?
Although the lease is not affected, there are some fairly nasty enforcement provisions against a Landlord who breaches the rules. In the worst cases, this can be a penalty of up to £10,000 or 20% of the rateable value of the property if greater (up to a maximum of £150,000). In addition, the enforcing authority has power to publish details of the breach on a public register, which could lead to negative publicity for a breaching landlord.
This is only intended to be a summary and not specific legal advice.