EPC regulation changes for commercial property from 1 April 2023

Commercial property landlords will be aware of the importance of EPC (Environmental Performance Certificate) on their building and the impacts it can potentially have on lettings. It is currently 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, with effect from 1^st April 2023 this requirement will be extended to both new and existing leases. This means that landlords cannot continue to let or sub-let a commercial property with an EPC rating of less than E.

The government have estimated that around 18% of commercial properties are in the EPC ‘F’ and ‘G’ rating brackets. This will have an effect on commercial property landlords as it could impact your ability to let or continue to let such properties. Alongside this it could impact rent reviews which you have with your client and the valuation of the property.

Owners of commercial property should look at their property portfolio and check the following:

• EPC rating
• Identify any let commercial properties with an EPC rating of F or G that will continue to be let after 1st April 2023
• Any marginal properties which have a rating of D or E
• Consider necessary energy efficiency improvements.
• The cost of energy efficient improvements and whether these can be passed directly to the tenant via service charge. This would require checking over the lease of your property.

It is important to be aware of the risks associated with not complying with these new incoming regulations, the penalty is based on the property’s relatable value and carries a maximum charge of £150,000.

If you can, make sure you plan for the longer term. The Government are keen to implement ambitious energy efficiency targets for the future in order to meet its commitment to 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. It is advised to consider protecting your property for these future energy targets.

How can we help you?

At Machins our solicitors will be able to help you identify commercial properties which will be subject to these new regulations. Alongside this we can review your leases and identify where costs can be claimed or passed onto your tenant. Our skilled advisors can negotiate costs which may be incurred due to energy efficiency adaptions with your tenants. Finally, as future protection of your commercial property we can assist with drafting leases which deal with potential issues relating to your property EPC rating.

Please contact us if you would like advice about commercial property law or landlord and tenant issues.