EPC changes from 1 April 2023
Changes to Energy Performance Certificate (EPC) requirements for non-domestic properties on 1 April 2023
Landlords of both domestic (residential) and non-domestic (commercial) properties are required to ensure that their rental properties meet Minimum Energy Efficiency Standards unless the property is registered as exempt.
Position Prior to 1 April 2023
A new lease of either a residential or commercial property to an existing or new tenant cannot be granted unless the property has an EPC with at least an E rating. Further, residential properties must have a minimum E rating where a lease is already in place and the property is occupied.
Position After 1 April 2023
From 1 April 2023, this requirement is being extended to commercial property where a lease is already in place and the property is occupied by a tenant.
Accordingly, landlords of commercial properties need to:-
review their property portfolios to check whether each let property has an EPC with a minimum E rating and obtain one if not (unless an exemption is registered); and
if the EPC has an F or G rating then they will need to either carry out works (subject to obtaining any third party consents) so that an E rating is achieved or register an exemption.
Exemptions
The exemptions for commercial properties are:
‘7 Year Payback’ - the cost of installing recommended improvement will be greater than the energy saving costs over 7 years.
‘All Improvements Made’ – all possible (if any) ‘relevant energy efficiency improvements’ have been made, and the property remains below an E rating.
‘Wall Insulation’ - cavity wall, external wall and internal wall insulation systems are deemed by an expert not to be appropriate.
‘Consent’ – consent for a relevant energy efficiency measure was refused, or granted subject to a condition that can’t reasonably be complied with.
‘Devaluation’ - the installation of energy efficiency measures would devalue the property, or the building it forms part of, by more than 5%.
‘New Landlord’ – a temporary exemption for specified, limited circumstances such as a lease granted by court order or a renewal lease.
Where an exemption applies, an application to be entered on the Private Rented Sector Exemptions Register will need to be made by the landlord or landlord’s agent.
Once registered, the exemption will last for 5 years (other than the ‘New Landlord’ Exemption which only applies for 6 months from the date the party became landlord).
After this time, the landlord must try again to improve the property’s EPC rating to meet the requisite minimum level of energy efficiency. .
Future Rating Requirements
Under current proposals, a C rating is expected to be required for new lettings in 2025, applying to any continuing tenancies in 2028, and further raised to a B rating by 2030. This should be taken into consideration where works have to be carried out as bringing the EPC up to a higher rating now will be likely more cost effective than having to carry out more than one set of works over the coming years
No April Fool
Landlords who fail to comply face civil and criminal penalties, with fines of up to £5,000 per property (expected to be raised to £30,000 per property by 2025).
Wallace LLP is happy to advise clients on these new requirements for non-domestic properties. Please contact Martin Otvos or Janey Wayne for further information.