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Energy efficiency rules for commercial property to tighten

“Landlords should be aware that they do not have an automatic right to enter the premises using the justification of carrying out EPC improvement works.  Whether a landlord has these rights if access will depend upon the lease drafting and if there is no such right then tenant consent will be required.  If consent cannot be obtained, the landlord may then be able to obtain a third-party consent exemption.”

Landlords are also exempt from having to comply with MEES if they can demonstrate that all cost-effective energy efficiency improvements - either within a 7-year payback or under the Green Deal’s ‘Golden Rule’ - have been carried out; or a suitably qualified expert provides written advice that the improvements would result in a devaluation of the property by 5% or more, or that the works would damage the property.   

The exemptions generally last for five years, after which the landlord must try again to improve the EPC of the premises in accordance with MEES.  If this is still not possible, then a further exemption may be registered.  The exemption must be registered in advance for a landlord to be able to rely on it without risk of attracting penalties, and exemptions are not transferable to a buyer if the property is sold.

Samantha warns: “Landlords that continue to let a sub-standard property - without a registered valid exemption - will be liable to two significant penalties: a financial penalty and a publication penalty.”

The financial penalties that can be imposed for letting a non-compliant property for a period of less than three months is a fine of 10% of the rateable value, with a minimum fine of £5,000 and a maximum of £50,000.  For letting a non-compliant property for a period of more than three months, a fine can be imposed of 20% of the rateable value with a minimum fine of £10,000 to a maximum of £150,000.

If a publication penalty is imposed, then details of the breach will be entered by the enforcement authority on the publicly accessible part of the Government’s PRS Exemptions Register, resulting in potentially adverse publicity for the landlord in breach.

The UK Government views the improvement of EPC ratings as playing an important role in achieving its goal of net zero by 2050.  The intention, which was set out in detail in its December 2020 white paper on the transformation of the UK energy system and the delivery of net zero, is that all rented non-domestic buildings achieve an EPC of C by 2027 before attaining B by 2030.  

Friday, March 31, 2023