To improve the UK household energy efficiency, combat the effects of climate change and promote alternative energy the government launched the the EPC (Energy Performance Certificate) in April 2008.
The energy performance certificate is legally required for all properties that are sold, bought or rented, it evaluates the properties and highlights their areas of improvement. However, there are changes coming soon regarding the requirements for minimum energy efficient standards (MEES) applicable to commercial buildings within the UK.
In the past it was unlawful for a landlord to market or rent a house with the EPC rating that was E or G (unless they had a valid exemption) in the case of new leases or lease renewals, starting April 2023, this rule will extend to every property. These modifications are part of the UK net-zero strategy of the government that is aimed at reducing carbon emissions by 2050.
However, changes are on the horizon regarding minimum energy efficiency standards (MEES) for commercial properties in the UK.
Whereas previously, it was illegal for a landlord to sell or rent a property with an EPC rating of F or G (unless they have a valid exemption), for new leases or lease renewal, from April 2023, this will be extended to all properties. These changes are part of the UK government’s net-zero plan which aims to reduce carbon emissions by 2050.
Throughout this article, you’ll learn everything about how and why the EPC regulation came into place, with historical dates and a brief about each regulatory change as well as future regulatory dates so you can plan your property management accordingly.
1st April 2008 – EPC Rating E for New Residential Tenancies
The current position regarding MEES which has been in place since 1st April 2018, is that it is unlawful for a landlord to grant a new tenancy of commercial property with an EPC rating of lower than E (unless an exemption applies).
1st April 2023 – Minimum EPC rating in the E range for all new and existing leases
This change will take effect from April 2023, when the same rule will be applicable to all leases currently in force.This means that it will be illegal for a Landlord continue to let commercial property that has an EPC rating that is less than E.
In December of 2020 the government announced the energy white paper, which spells out the steps the government will in the coming 10 years to achieve its goal of net-zero emissions by 2050, and to “ensure the UK is at the forefront of the Green Industrial Revolution”.
In addition, this white paper laid out an updated framework for achieving the goal to increase the MEES for all commercial properties up in the country to the EPC rating that is B before the 1st April of 2030.
The latest consultation regarding the 2030 targets of the government to define the guidelines for a gradual implementation and to address a few issues and systemic changes that are required to be put in place to help meet the target, as well as ensure and implement the new 2030 goal.
The phased implementation is likely to consist of 2 “compliance windows” each lasting two years. Each time period, the tenant will be required to provide an EPC and, at the conclusion of the time frame, the landlord will be required to show that they have the property brought in compliance to the required EPC standard.
Compliance Window 1
1st April 2025 to 1st April 2027: Beginning of compliance window 1 – Target of EPC Rating ‘C’ For all
From 1 April 2025, all non-domestic rented buildings within the scope of the MEES regulations would have to have a valid EPC, meaning that if one had expired, a new one must be obtained.
The UK governmenet white paper talks about a requirement for a landlord to “present” a valid EPC by 1 April 2025. This means that the landlord will have to submit its EPC to an online Private Rented Sector compliance and exemptions database.
From 1 April 2027, the minimum required rating would increase to ‘C’, so that landlords must have improved the building by then, or have registered a valid exemption. If the building already possessed a ‘C’ rating as of April 2025, the landlord would be in compliance with the regulations. However, if not, the landlord would have to present a new EPC with its ‘C’ rating by 1 April 2027 or register an exemption.
Compliance Window 2
1st April 2028 – The beginning of the compliance window 2. (Second presentation of an eligible EPC Target Rating of ‘B’
Landlords are required to show an authentic EPC. When the EPC already has an EPC rating that is B or higher the property will be in compliance. If the property is rated with a rating below B, the property owner must carry out any necessary works to obtain the EPC rating in the B category or to have registered an exemption before 1 1 April , 2030.
1st April 2030 – the end of the compliance window 2. (Minimum EPC rating of B)
A landlord will need to provide an acceptable EPC before April 1st, 2028. After 1 April 2030 the minimum rating would be raised to the ‘B’ rating. When the structure already had an rating of a ‘B’ rating in April 2028, the property was in compliance. If it did not, the landlord will need to submit a new EPC with its “B” rating on or before April 1st, 2030 or file for an exemption.
Things for commercial & domestic landlords to consider:
The discussion also covered the following aspects:
- Cost of work. It is proposed that the requirement to comply with the MEES standards on each enforcement date will have to be based on the payback test of seven years. That means the implementation of energy efficiency improvements will be only required in the case where these improvements are able to achieve the energy efficiency payback period of 7 years or less. If the upgrades required to bring the home to the standard required don’t meet the payback of seven years test the Landlord is required to show that they’ve reached the most high EPC rating feasible within those limits.
- Central Register of compliance and exemptions. It is suggested that a new database central that tracks compliance and enforce should be established in which Landlord must submit their compliance EPCs or the details regarding any exclusions.
- Responsibility for Compliance. Under the relevant rules, it’s the responsibility of the Landlord to be in compliance with MEES. It is acknowledged that a collaborative model isn’t in the current context however it is possible additional legislation will be introduced to mandate cooperation between Tenants and Landlords, or impose obligations on Tenants.
- A departure from the enforcement of EPC regulations at the time of leasing. This is of particularly importance to properties let in an “shell and core” state where the landlord would be required to install energy efficiency measures within the property to be in compliance with MEES at the time of letting, but only for the tenant to take them off immediately after them once the property is fitted out.
- Listed buildings. A clarification has been given for Listed Buildings that Listed Building requires an EPC but is qualified to request an exemption in case the MEES standard is not achieved for the property because of these works not being compatible with listed or planning regulations.
These future regulations may change, however it is highly recommended to follow the current regulatory projections now. You can easily find commercial and domestic EPC assessors near you by using our EPC assessor search tool.
What can commercial property owners do if their property is graded EPC F or lower?
Commercial property owners have to make the recommended changes outlined on their EPC certificate to improve their rating for their home. Tenants could be asked to leave the premises while the work is being completed or pay for the cost of the work.
The changes needed for a commercial property to be upgraded EPC rating may include
- Insulate the whole property
- Removing the boiler and replacing it with an energy efficient model
- Double glazing installation
- Moving to a renewable energy sources such as solar and heat pumps
- Installation of low energy lightbulbs
In many instances it will be sufficient to comply with the new regulations without any further concerns.
Strategies for landlords who want to purchase commercial properties
If you’re a property owner looking to buy a commercial building ensure you do a thorough study before making an investment. In the past, many landlords are selling their properties due to the changes coming and the fact that they have a extremely poor EPC rating.
Find out why the house is being sold prior to going through the EPC certificate for the property. Even if the EPC rating is not very high The suggested changes could be feasible enough to implement without a lot of stress or cost.
However If you find that the EPC rating is poor and there doesn’t seem to be any room for improvement then it may be wise to look into investing in a different property.
Want to lease a commercial property in 2023?
Businesses who are looking to lease commercial property should ensure the building is equipped with the EPC rating with a rating of the minimum of E. Request the EPC certificate prior to making any decision.
If your EPC rating is less than the E level, your business may be removed from the business when the changes are implemented in April. This could result in unwelcome interruptions and costs that could hinder the growth of your company.
Conclusion
Commercial properties must have the EPC rating that is at minimum E for every property bought or leased after April 2023. This will improve the efficiency of our energy efficiency, decrease carbon emissions and slow the pace of climate change.