2 minute read
Anderson, Wilde & Harris
Commercially sound
EPC targets for rented commercial properties
Richard Kirby BSC, MRICS Director Anderson, Wilde & Harris
In June 2021 a consultation was held to support the government’s roadmap for the UK to bring all carbon emissions to net zero by 2050. Landlords, tenants, and local authorities in England and Wales were among those invited to take part.
If nothing changes, minimum energy efficiency standards (MEES) compliance will require all non-domestic private rented properties to have an energy performance certificate (EPC) level C by 1st April 2027 and a level B by 1st April 2030. Currently, they are required to have EPC level E. Using these staggered milestones allows landlords and tenants to work together to achieve these targets, where it is cost effective to do so. Exemptions can be applied for in certain circumstances, but failure to meet these EPC levels without an exemption would lead to fines being levied.
The government is expected to publish a response to the consultation towards the end of this year, so it will be interesting to see what is changed. While there does seem to be support for these proposed regulatory changes from many in the private rented sector, there are some key areas of concern that have been raised.
Due to conflicting guidance, there is an element of uncertainty around how the updated EPC regulations will affect listed buildings.
To make things clearer for everyone, the consultation proposes to make it a requirement for all tenanted listed buildings, and those in conservation areas, to require an EPC, with the ability to apply for relevant exemptions.
Another item being addressed is properties which are rented in a shell and core state. Retail, office, and certain industrial sectors often rent buildings in this way, where a tenant will want to furnish the building to suit their needs, rather than renting a previously furnished property.
The challenge presented is that often, as the tenant begins occupancy, they will install or make changes to things such as lighting, ventilation, and air conditioning, and possibly even heating. These aspects can influence the EPC rating.
As landlords are required to ensure that the EPC is a given level before they are legally allowed to rent it, the concern is that the landlord may need to have work carried out to meet the required EPC level, only to have the tenant remove them again immediately as part of their fitout.
Alternatively, pre-tenancy agreements that stipulate that the tenant pays for the fitout before legally becoming a tenant are not always popular. The level of risk that these kinds of agreements carry for the prospective tenants is not one that everyone is comfortable with.
In addition to the above there are other areas that the consultation discusses. One of the main things to take away from it though is that landlords and tenants will need to work together towards a common goal. Otherwise, it may be difficult to achieve the required EPC levels. Naturally, each party will bear certain responsibilities. Without cooperation, particularly for buildings where tenants make significant changes during their fitout, achieving the net zero carbon emissions target will become impossible.
