Commercial Landlords need to be energy efficient

Commercial property landlords in England will be legally required to upgrade the energy efficiency of their properties to at least Band “E” standard by 2018 before they can be leased to new or renewing tenants, the UK government has confirmed.

Over time, it is likely that the minimum E standard will rise.

From April 2018, it will be unlawful to let commercial (and residential) properties with an EPC rating of F or G, the two lowest grades of energy efficiency. The new rules will be extended to cover all leases by 2023. It is estimated that 20% of non-domestic properties could be in the F or G bracket.

Where a landlord sells the interest in the property before the works to bring it up to the minimum efficiency standard, the successor landlord will inherit liability.

Tenants may worry that some of the standard clauses in the lease will oblige them to effect works to improve the energy efficiency or to pay through the service charge for the landlords to do the work.

Assistance

Some assistance may come from the government with the Green Deal (“GD”) initiative. The GD may provide a financial solution to support energy efficiency refurbishment and retro-fit projects. Landlords and sub-letting occupiers will need to achieve an EPC rating of “E” or have implemented the maximum package allowable under the GD even if they fall short of an E rating.

Before 2018

–          All rentable  properties need to have an EPC assessment

–          Where the EPC rating is F or G or is at risk of becoming so, an Energy Efficiency Plan should be put in place to improve the energy efficiency of the property. Energy efficiency improvements should take advantage of void periods, lease breaks and/or be included as part of an on-going maintenance and plant renewal programme.

–          Energy efficiency works should be implemented before April 2018.