EPCs, also known as Energy Performance Certificates, were introduced to the UK in 2008 and are used to rate the efficiency of commercial and residential properties. In this blog, we’ll explore the legal requirements landlords and property owners need to adhere to in regards to commercial property EPCs.
What are EPC certificates for commercial properties?
An EPC certificate for commercial properties offers a rating between A and G, with A indicating high efficiency and G indicating low efficiency. They’re also colour coded to clearly show how energy-efficient a building is. This helps people decide whether a property is a good investment, whether heating and energy bills are likely to cost more and if they’re going to emit more carbon emissions depending on the EPC rating given. The EPC will also come with a recommendation report which provides recommendations on how to improve the energy efficiency of a building.
EPC requirements for commercial property
EPC requirements are derived from the Minimum Energy Efficiency Standards (MEES). As a result, it’s important that landlords and property managers understand and adhere to the standards outlined by the MEES.
Minimum EPC rating for commercial property
As of April 1st 2023 it has been mandatory for all commercial properties to have an EPC rating above an E. This applies to all commercial properties:
- that are new builds;
- to be sold;
- or let out (including lease renewals).
Save for some limited cases, properties rated an F or G are now prohibited from being sold, let on new leases and from renewal leases being granted.
Future changes to MEES regulations
It has been proposed that by:
- 2027 all commercial properties must have been improved to a rating of C or above or be registered for a valid exemption.
- by 2030 all commercial properties must be improved to an EPC rating of B or above or be registered for a valid exemption.
When is an EPC not required for commercial property?
In the UK certain types of commercial properties don’t require EPCs:
- Places of worship.
- Industrial sites, workshops and non-residential agricultural buildings that do not use a lot of energy.
- Listed properties.
- stand-alone buildings with total useful floor space of less than 50 square meters.
- Some buildings that are due to be demolished.
- Temporary buildings with planned use of two years or less.
- Holiday accommodation that’s rented out for less than 4 months a year or is let under a licence to occupy.
Commercial property EPC exemptions
There are a few reasons why a commercial property may obtain an EPC exemption, such as:
- All improvements have been made - If all improvements have been made and the property still doesn’t meet EPC requirements an exemption can be registered, if documentation is produced evidencing that all of the improvements have been made. This exemption will last 5 years.
- High Cost exemption - If no improvement can be made because the cost of installing even the cheapest recommended measure would exceed £3,500 (including VAT). This exemption will last 5 years.
- Wall Insulation exemption - if the only relevant improvements for your property are:
- cavity wall insulation.
- external wall insulation.
- or internal wall insulation (for external walls)
AND you have obtained written expert advice showing that these measures would negatively impact the fabric or structure of the property (or the building of which it is part). This exemption lasts 5 years.
- Consent exemptions - If improvements require consent from tenants, mortgages or other parties and despite using your best efforts consent is denied or unreasonable conditions are given an exemption can be made. Evidence of no consent will be needed to gain an exemption. This exemption lasts 5 years or, where lack of tenant consent was the issue, until the current tenancy ends or is assigned to a new tenant
- Property devaluation exemption - if you have evidence showing that making energy efficiency improvements to your property would devalue it by more than 5%. This exemption lasts 5 years.
- Temporary exemptions for new landlords - Under certain circumstances, new landlords can claim an exemption for up to six months. Proof of the date they became a landlord and qualifying conditions for the exemptions must be provided.
Is there a difference between commercial and residential EPCs?
Commercial and residential EPCs are very similar in terms of their grading system, however commercial EPCs are designed specifically for business premises. This includes offices and retail spaces. As a result, suggestions made in the recommendation reports for commercial buildings EPC are likely to be more extensive than those for residential buildings.
When is an EPC required for commercial property?
All commercial properties that are either sold or let in the UK and Wales are required to have an EPC rating due to the Minimum Energy Efficiency Standards (MEES) directive.
The UK government states that all commercial properties must have an EPC if:
- You rent a property.
- You sell a property.
- A new building has been completed.
If you’re looking for support with the purchase or renting of a commercial property, our commercial property solicitors can provide expert advice and guidance. Get in touch with us today for further support.