The current legal requirement for commercial lettings is that your building must have an EPC rating of at least an “E” if you intend to grant a new or renewal lease.

With effect from 1st April 2023 however, this legal requirement changes and will be extended to all existing leases; this could have a massive impact on your current commercial lettings. The change means that you may be in breach of the Minimum Energy Efficiency Standards (MEES) regulations if you continue to let or sub-let a commercial property that has an EPC rating below an “E”.

Not only could this forthcoming change effect your ability to let or continue to let, the same may also have an impact on any upcoming rent reviews and the consequent valuation of the effected property.

With energy bills being the “hot” (…excuse the pun) topic of the moment, well advised tenants will be aware of the upcoming legislation change and we recommend that you make provision accordingly, as non-compliance with the incoming regulations carries a maximum fine for landlords of £150,000 in addition to publication of the breach.

Act now:

  • Do any of your current properties have an EPC rating of “F” or “G” that will continue to be let after April 2023?
  • Do you currently let any “marginal” commercial properties that have a rating of “E” or “D”?
  • What (if any) improvements can be made to the energy efficiency of these properties (changes as simple as replacing the lightbulbs perhaps)?
  • Can the cost of these improvements be passed down directly to your tenants by way of an existing service charge?

Future proof:

  • As part of the government’s push to achieve 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. The only way is up when it comes to energy!

How can Ellisons help you?

As well as answering any questions that you may have about the upcoming changes to energy efficiency regulations, we would be pleased to review your existing leases and consider whether any energy improvements can be made under the same, by whom and at whose cost. There are also some limited exemptions available to commercial landlords and we can advise whether you may be able to take the benefit of the same.

If you have any queries about this article, please do not hesitate to contact Joanna McKenna in the first instance.