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Changes to Energy Performance Certificates for Commercial Landlords

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On 1 April 2018 the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 came into force (referred to in this article as the 'Regulations').

Effects of the Regulations

As you may already be aware, if a property is one for which an Energy Performance Certificate ('EPC') is legally required; an owner will need to provide an EPC to potential buyers and tenants before marketing the property to sell or rent.

EPCs contain information about a property's energy efficiency and recommendations about how to reduce energy use. For non-domestic properties an EPC will give a property an energy efficiency rating from A+ to G (with A+ being the most efficient rating).

The Regulations now set a minimum level of energy efficiency for private rented property in England and Wales for both domestic and non-domestic properties,

This is currently set at an EPC rating of at least band E.

New Leases and Renewals

From 1 April 2018 landlords of both domestic and non-domestic private rented properties are no longer permitted to grant a tenancy to a new or existing tenant if their property has an EPC rating of F or G. 

This includes granting renewal leases to existing tenants.

If a landlord wishes to let a property that does not have an EPC rating of at least an E, they will need to either:

  1. make the recommended energy efficiency improvements; or
  2. register a valid exemption on the PRS Exemptions Register.

Continuing Leases

Furthermore, the Regulations state that:

  • From 1 April 2020, landlords of domestic private rented properties will not be permitted to continue letting a property that is already subject to an existing lease if it only has an EPC rating of band F or G; and
  • From 1 April 2023, landlords of non-domestic private rented properties must not continue letting a property that is already subject to an existing lease if the property has an EPC rating of band F or G.

Scope of the Minimum Energy Efficiency Provisions

The Regulations apply to both domestic and non-domestic properties in England and Wales.

Domestic Properties:

For domestic properties the Regulations only apply to certain types of domestic tenancy and to properties which are legally required to have an EPC.

This article primarily relates to the effect of the Regulations for non-domestic landlords. However if you are a landlord of a domestic property and would like advice on how the Regulations may effect you, we are happy to discuss this with you.

Non-Domestic Properties:

For non-domestic properties the Regulations apply to all non-domestic properties in England and Wales that are legally required to have an EPC and which are let under a tenancy. 

Properties that are occupied under licence or subject to agreement for lease arrangements may not be subject to the Regulations.

Non-domestic private rented properties will not be required to meet the minimum energy efficiency standards if:

  • they are let for a term not exceeding 6 months; or
  • the lease is granted for a term of 99 years or more.  

Circumstances where an EPC may not be required:

An EPC may not be required for certain types of non-domestic buildings, including where the building is officially protected because of its special architectural or historic merit, or is used as a place of worship. Buildings of a temporary nature with a planned use of 2 years or less; industrial sites with low energy demands, and stand alone buildings with a total useful floor area of less than 50 m2 may also not require EPCs.

Exemptions

If you are the owner of a property that does not have an EPC rating of at least an E, there are a number of exemptions that may still be available to you.

For non-domestic landlords these include an exemption that applies where the landlord has carried out the recommended improvements to the property but the energy efficiency rating of the property is still below an E.

For further guidance on the exemptions that may be available to you or how to register them, please do not hesitate to get in touch with us.

Compliance

The enforcement authority charged with enforcing the Regulations will generally be the Trading Standards department of the local authority for the area. 

Where an enforcement authority believes that a landlord may have breached the Regulations, they can serve a Compliance Notice to request information from the landlord.

Penalties:

There are also a number of penalties which may be imposed for a breach of the Regulations. 

For landlords of non-domestic properties, these include financial penalties of up to £50,000 where a landlord has not complied with the Regulations by letting a property with an EPC rating of less than E and has been in breach for less than 3 months, and up to £150,000 where the landlord has been in breach for more than 3 months.

There are additional financial penalties available where were the landlord has registered false or misleading information on the PRS Exemptions Register or where the landlord has failed to comply with a Compliance Notice.

In addition, the enforcement authority will publish details of the landlord's breach on the PRS Exemptions Register, including the landlord's name, details of the breach, the property address and any financial penalty imposed.

The financial penalties that enforcement authorities can impose upon landlords of domestic private rented properties differ slightly from those of non-domestic properties.

If you require any support or guidance on the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 and how they may affect you, please contact Rory Cullen or a member of the Commercial Property Team by calling 01522 512123.

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