With energy consumption at the forefront of our minds at present, many people may not be aware that measures are in place to ensure that commercial properties in the UK meet the legislative energy efficiency standards.
It is estimated that commercial buildings are responsible for a significant proportion of the UK energy consumption and carbon emissions. Understanding how to reduce and manage energy consumption is therefore important in terms of achieving carbon reduction targets, as well as reducing the running costs on commercial buildings. With ever increasingly ageing building stock, this can be a costly exercise for a landlord.
Energy Performance Certificates (EPCs) were introduced in England and Wales back in 2007 and remain a legal requirement when marketing a commercial property for sale or rent. The aim is to promote the improvement of the energy performance and the identification of ways in which energy efficiency can be improved in commercial buildings. An EPC gives a property an energy rating from A (most efficient) to G (least efficient).
The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 require that both residential and commercial properties must meet a minimum energy efficiency standard (MEES regulations) in order to be suitable for sale or rent. Since 1 April 2018, subject to certain exemptions, the MEES regulations prohibit landlords of commercial properties with an energy rating of F or G (otherwise known as a substandard property) from granting leases to new tenants.
Further MEES regulations are expected to come into effect from 1 April 2023. Similarly, subject to certain exemptions, a landlord of a commercial property cannot continue to let a commercial property if it is classed as substandard (i.e. has an energy rating below E). For instance, any lease granted before or after 1 April 2018, which remains in existence after 1 April 2023 will be caught by the regulations, and this may have costly consequences for a landlord who may be required to improve the property’s energy efficiency level.
There may also be practical implications arising under the terms of the lease, especially an older lease granted some years ago, as to whether a landlord is entitled to enter the premises occupied by the tenant, to carry out the necessary works. The key question for all landlords continuing to let their commercial properties on or after the 1st of April 2023, is therefore whether these regulations apply to their properties, and if so, whether they are obliged to carry out the necessary improvement to ensure that the property is no longer classed as sub-standard.
For any of our Commercial Property clients who may be uncertain as to the current requirements, and/or the potential implications of the anticipated regulations due to come into effect in April 2023 on their currently leased properties, please do not hesitate to get in touch with us for further clarification.
Likewise, if you are considering granting a new lease or selling your commercial property, it is essential that you ensure that the property meets the current energy efficiency requirements. Here at Arnold Thomson, we have a highly experienced team specialising in all aspects of commercial transactions and leasehold arrangements, and we are here to assist with your legal needs or any enquiries you may have.