New regulations for commercial properties regarding minimum energy efficiency standards (MEES) were introduced on 1st April 2023. The update applies to buyers and existing landlords of commercial property in the UK.
Even before this update was introduced, it was a legal requirement for commercial buildings to have a rating of at least an E before a new lease or renewal lease was granted. However, with this update, it is now an offence to let properties with a rating of F or G.
Therefore, it will be unlawful for landlords to continue to rent substandard commercial property.
To find out the rating for a property, please click here.
Penalty for Breaching Regulations
If a landlord rents out a sub-standard commercial property and the breach lasts less than three months, they may be fined a minimum of £5,000, or 10% of the property’s rateable value, up to a maximum of £50,000. However, if the breach exceeds three months, the landlord may be fined a minimum of £10,000 or 20% of the property’s rateable value, up to a maximum of £150,000.
It must be noted that the validity of an existing lease is not affected by a breach of regulations from 1st April 2023. However, the tenant cannot sublet the property unless the EPC rating is at least an E.
Some property types do not require an EPC. They include:
- Any property that does not use energy to control the indoor temperature, such as a warehouse.
- Any temporary building in situ for less than two years.
- Any listed building whereby compliance with the regulation would unacceptably alter the appearance or character.
- Buildings smaller than 50 metres squared.
- An industrial site or workshop with low energy demands.
- Furthermore, in some cases, a landlord may be allowed to continue to let a substandard commercial property. These reasons include the following:
- Where improvements are required on the property, and consent is needed from the tenant or a third party, and it is refused, the landlord cannot make the improvements.
- If the improvements have been made, but the property remains below the required level.
- If the landlord has been unable to improve the rating because the landlord has obtained a report from an independent surveyor that states that making the improvements would result in a reduction in the market value of more than 5%.
- For new landlords, there is a six-month exemption of substandard property, subject to an existing tenancy to carry out the improvements.
- For a buyer of a tenanted commercial property with a rating below E, it is possible to register a temporary six-month exemption to enable the buyer to get the property up to the required standard.
- The landlord can show that the expected value of savings on energy bills over seven years is less than the cost of the improvements.
Solicitor for Commercial Property Matters
At Muscatt Black Graf, our experienced commercial property and commercial conveyancing solicitors assist their clients with buying, selling, or leasing commercial property for owners, occupiers, investors or developers.
This blog was prepared on 13 April 2023. It is not intended to be advice and should not be relied upon as such.