The Future of Energy Efficiency: Preparing for the 2023 EPC Rating Increase in Commercial Lets

If you are involved in leasing commercial properties, it’s essential to be aware of recent changes in Energy Performance Certificate (EPC) regulations. On 1st April 2023, the government introduced requirements for landlords to produce EPC ratings of band ‘E’ or better for their commercial properties. Such standards are designed to help the country achieve net zero emissions by 2050, with failure to comply potentially costing you up to £150,000 in fines.

To help you navigate the world of EPC assessments and avoid nasty surprises, we’ve compiled a quick guide to ensuring your property meets the latest requirements.

First things first: Establish a list of actions.

If you still need to get around to assessing the new EPC regulations, don’t fret. Here are a few steps to follow before you take any actions:

• Review your commercial property portfolio: What are the current EPC ratings for your properties? If they’re better than ‘E’, you don’t have to take any immediate action. If any properties fall below standard, check whether you have the right to access and undertake any remedial work according to your lease. You should also check whether the building is exempt from the new rules (see below for more details).
• If necessary, book an EPC assessment: If you haven’t ordered an EPC assessment in some time, you should book an inspection. As well as providing an up-to-date evaluation of the property’s energy efficiency, an assessor will provide recommendations about the kinds of work that will improve your property’s rating.
• Address necessary works: Once you’ve established what changes you need to make, check your lease(s) carefully to establish whether you or the tenant(s) are responsible for covering the cost of the works. Then, you can start conversations with tenants about when and how you will undertake the work.
• Consider future-proofing other properties: If your properties are rated ‘E’ or only slightly higher, it’s worth noting that there are proposals in the works to raise minimum standards to band ‘C’ by 2027 and ‘B’ by 2030. You could save time, effort, and money by making adjustments now.

Are there any exemptions for the new requirements?

Yes! While the rules are relevant for all rented commercial premises, there are limitations surrounding the practicality and cost of work. Here are legitimate exemptions to note:

• Consent issues – i.e., if you’re unable to obtain consent to carry out the works from a tenant or third party.
• Wall installation problems – you may be exempt if wall installations would threaten the structural integrity of the property.
• You’re a new landlord – new landlords may be granted six-month exemptions in certain circumstances.
• The property remains below ‘E’ despite remedial work – i.e. if you’ve made recommended changes, but the property remains below standards.
• Seven-year payback rules – i.e., if the cost of recommended improvements would be higher than the savings made on energy bills over seven years.
• Changes would devalue the property – if works would damage your property or devalue it by 5% or more, you can apply for an exemption.

Please note that exemptions are not automatically applied, so you must register your exemption with the PRS exemptions register before starting a new tenancy. Approved exemptions are valid for five years and cannot be transferred to new property landlords.

Need help with inventory management due to EPC rating regulations? No Letting Go is here to help.

If you’re feeling a little disoriented by new rules and regulations, we don’t blame you. Navigating the commercial property sector can be confusing and stressful. Fortunately, No Letting Go is here to handle the complexities of inventory management. Get in touch today to find out more.