EPCs for commercial property: a legal perspective

On behalf of Attwaters Jameson Hill posted in Corporate, Company and Commercial on Wednesday, April 6th, 2022

What is an EPC?

An Energy Performance Certificate (EPC) rates how energy efficient your building is on a scale from A to G (with A the being the most efficient grade and G being the least efficient). Once issued, an EPC is valid for 10 years.

Why is energy efficiency important?

The many benefits of energy efficiency include environmental (increased efficiency can lower greenhouse gas emissions and other pollutants, as well as decrease water use) and economic benefits (improving energy efficiency can lower individual utility bills, create jobs, and help stabilise electricity prices). The energy we use for heating and powering our non-domestic buildings is responsible for around 12% of the UK’s emissions.

Do you need an EPC to sell or let commercial property at the moment?

Yes, you need an EPC at grade E or higher as of 1April 2018 (this is when the Minimum Energy Efficiency Standard, or MEES, was introduced). Currently, the requirement for an EPC is triggered at the point of sale or letting, while the requirement for a new EPC is not triggered until the building is re-let or sold.

What happens if you fail to provide one?

If you don’t provide an EPC at grade E or above to a prospective buyer or tenant, you will be fined a percentage of the rateable value of the building. The percentage you pay is based on the duration of the breach.

If a property has been let in breach of MEES for less than three months, the fine will be 10% of the rateable value of the property (subject to a minimum of £5,000 and a maximum of £50,000).
If a property has been let in breach of MEES for more than three months, the fine will be 20% of the rateable value of the property (subject to a minimum of £10,000 and a maximum of £150,000).
If a landlord has registered false or misleading information on the Exemptions Register, a fine of up to £5,000 may be imposed.
If a landlord fails to comply with a compliance notice, a fine of up to £5,000 may be imposed.

Are there are any exceptions to the need for a commercial EPC?

Yes, you don’t need an EPC if you can demonstrate that the building is any of the following:

Listed or officially protected if the minimum energy performance requirements would unacceptably alter it.
A temporary building that will only be used for two years or less.
Used as a place of worship or for other religious activities.
An industrial site, workshop or non-residential agricultural building that doesn’t use much energy.
A detached building with a total floor space under 50 square metres.
Due to be demolished by the seller or landlord and they have all the relevant planning and conservation consents.
Due to be sold or rented out with vacant possession and is suitable for demolition and the site could be redeveloped and the buyer/tenant has applied for planning permission to demolish it.

What next?

From 1 April 2023, MEES rules will be extended to capture existing leases, and not just new sales and leases (as is the case currently). This means that continuing to let without a valid EPC will be in breach of the regulations.

The government has also undertaken a consultation on raising the pass grade for commercial property to B from 2030, but the results are not yet known. The consultation proposed raising the pass grade through two compliance windows: firstly, to C between 1 April 2025 and 1 April 2027, and then to B by 1 April 2030.

Landlords should be mindful of the increasing focus on better energy efficiency in buildings, and should have an understanding of who is responsible for funding any improvement works. If you would like us to assist you in reviewing your lease and seeing where these obligations currently lie, please do get in touch.