What happens if you don’t have a valid commercial EPC?

Just over a year ago, on 1 April 2023, Minimum Energy Efficiency Standards (MEES) and Energy Performance Certificates (EPC) were updated. So one year on, what’s been the impact of the tightened rules? writes Tyson Sheppard Chartered Surveyor and Partner at Tunbridge Wells and Tonbridge based Estate Agents, Bracketts. 

The position for Commercial properties was that a tenancy could not be granted to new or existing tenants if the property had an EPC rating of F or G, unless the property is registered on the PRS Exemptions Register. It was an offence to continue to let or rent out a property if it does not have a rating of at least E. The penalty is based on the rateable value of the property and is between £10,000 – £150,000 per breach. Details of the breach may also be made publicly available.

The government indicated that these requirements could tighten again in the future, with a proposal that commercial properties must have an EPC rating of C or higher by 1 April 2027, and B or better by 2030.

(For residential properties the requirement for the EPC rating to be E or higher has already been in place since 1 April 2020. In 2025 this could be upgraded to a requirement for the rating to be C or higher for any new lettings, and in 2028 it will also apply to any continuing tenancies.)

With the significant changes and upgrades required to bring properties up to the required standard you may wonder – as I have – how many Commercial landlords have fallen foul of the law? How many breaches have been publicised?

The issue had also been aired by Modus, the Royal Institute of Chartered Surveyors’ magazine. 

Lack of awareness and resources hampers action

In many instances, local authorities have very little idea that breaches are being committed, because these are not necessarily obvious. Unless a tenant complains that the property does not have an EPC, or that it is in such a state of disrepair that there is a fair chance it is in breach, the situation is unlikely to come to the local authority’s attention.

Another key reason for the lack of enforcement is rather obvious: local authorities are severely overstretched. 

In fact we have been unable to find any examples of landlords being fined for breeches of MEES or EPS rules. But there’s more.

Faced with a national inability across many local authorities to enforce any action, last September Rishi Sunak, the current Prime Minister, announced an about face. The government decided to alter its stance on the Minimum Energy Efficiency Standards (MEES).

Instead of compelling landlords to make immediate upgrades, the government has shifted its focus towards encouraginglandlords to voluntarily improve their energy efficiency, where possible. 

One crucial aspect that remains unclear following this announcement is the fate of the new target set for energy efficiency ratings. As of April 2023, properties were expected to attain a minimum energy efficiency rating of D. The question now is whether this target will persist, or if it applies solely to the government’s broader objective of achieving an energy efficiency rating of C for properties by 2025.

These standards represented a significant shift towards enhancing energy efficiency in the UK’s real estate sector, with the aim of reducing carbon emissions and promoting sustainable living. The decision to scrap forced upgrades and instead encourage voluntary improvements in energy efficiency introduces an element of flexibility into the property market but this is seen by many as a real retreat in terms of our jouney towards net zero. 

The future of the UK’s energy efficiency targets remains uncertain, especially considering the ambiguity surrounding the continuation of the energy efficiency rating of D. Property owners, tenants, and industry experts will undoubtedly keep a close eye on further developments and clarifications from the government.

It’s worth noting that alongside the changing landscape of energy efficiency regulations, landlords and property developers are also grappling with a range of other regulatory compliance issues. These include meeting net zero targets, adhering to standards like BS8887, and addressing the current and forthcoming Fluorescent tube ban. Navigating these complex and evolving regulations is a significant challenge that will shape the future of the UK’s property industry. Stay tuned for updates as the nation continues its journey towards a more energy-efficient and compliant future.

If you would like to discuss something related to a commercial property please contact our Building Surveying team or our Commercial team.

Tyson Sheppard MRICS

Partner

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