EPC Requirements for Lettings of Commercial Premises
Instead, the current minimum requirement of an EPC rating of E will remain. However, for commercial premises over 1,000 square metres, the minimum requirement shall increase to a B rating from 2031.
Quick recap: what is a commercial EPC?
An EPC rates the energy efficiency of a building. A certificate is required on every commercial sale, letting and lease renewal unless exempted. Certificates are only valid for 10 years and then expire. A landlord can face enforcement action or a fine if a valid EPC needs obtaining. It is easy to check whether any commercial premises has an EPC by searching the Government’s online EPC register. The obligation is on the landlord to obtain the EPC and provide it to the tenant. This obligation also applies on a lease renewal where the tenant is already in occupation.
The update in detail
The Government’s latest position is as follows:
- Commercial premises under 1,000 square metres
These premises will continue to be subject to the current minimum requirement of EPC E.
- Commercial premises over 1,000 square metres
From 2031, these premises are expected to require a minimum EPC rating of B, provided the relevant improvements are cost-effective.
No changes have been made to the current exemptions available where an EPC is not required or where a landlord is not required to carry out improvement works.
The seven-year payback exemption will also continue to apply. This exemption may be available where a landlord can show that the cost of purchasing and installing the recommended improvements would not be recovered through the expected savings on energy bills over a seven-year period.
Final thoughts
Although secondary legislation is still required before the change is implemented, the update will be welcomed by both landlords and tenants.
For landlords, it provides greater clarity when complying with EPC regulations on the grant of new leases and lease renewals, although it may result in capital expenditure to bring premises up to the required standard. Landlords with larger premises will have time to plan for compliance before 2031.
For tenants, the changes may also be relevant when negotiating new leases or renewals. Energy efficiency works can affect occupation, service charge liability, rent review assumptions and repair obligations.
If you are a landlord or tenant and need guidance or further clarification on the EPC requirements for commercial premises our commercial property team will be more than happy to help.
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