All change for EPCs in Commercial Property

The UK government has just issued its interim response to the 2019 and 2021 consultations on strengthening non-domestic MEES in England and Wales.

The Proposals

• The previously proposed interim EPC C milestone for 2027 will not be taken forward.

• Buildings below 1,000 square metres are expected to remain subject to the current minimum standard of EPC E, with no fixed deadline to move beyond that level.

• From 2031, it is proposed that privately rented non-domestic buildings over 1,000 square metres should meet EPC B, where cost effective.

• The EPC B requirement for larger buildings will only take effect after secondary legislation is passed by Parliament.

Duties on Landlords

Where landlords intend to grant new leases or continue existing leases of sub-standard properties, they will either need to 1) make energy efficiency improvements raising the property to achieve the relevant EPC standard or 2) register a legitimate reason on the ‘Exemptions Register’ for failing to meet that EPC standard or above.

Existing flexibility mechanisms will remain, including the 7-year payback test and exemptions, so landlords should only be required to carry out measures that are practical, affordable and cost effective.

Duties on Tenants

A tenant is under a duty to 1) allow an energy assessor access where it is reasonably necessary for the purposes of preparing an EPC and recommendation report and 2) co-operate with the landlord to allow the landlord to comply with the duty to prepare an EPC and recommendation report.

Dealing with the cost of improvement works

Whilst ultimate responsibility to complete improvement works rests with the landlord, it may be the costs of those works are recoverable via service charge provisions in a lease or, possibly in accordance with the tenant's repairing covenants.

If you are a commercial landlord or tenant set to be impacted by the changes to EPCs or, you have any concerns or questions about the impact the changes may have on you or your business, please do not hesitate to get in touch with our Real Estate Litigation team or your usual Brodies contact.