Navigating EPC Regulations for Commercial Landlords: A Comprehensive Guide for Compliance and Efficiency
The EPC regulations stipulate that commercial landlords must ensure their property is rated at least ‘E’ before advertising it for rent. This is a good thing for both tenants and landlords alike. Landlords can use the recommendations of an EPC to carry out cost-effective energy efficiency improvements that will improve their rating and ultimately save them money on energy bills.
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What is an EPC?
An EPC is an Energy Performance Certificate that an approved energy assessor produces.
- It includes a property’s rating from A (most efficient) to G and is valid for ten years.
- It also details recommendations to help increase a property’s energy efficiency.
- The EPC is an essential tool for businesses, as it helps them identify potential savings in energy costs.
- This ultimately reduces operating expenses, which enables them to stay competitive and profitable.
- The EPC is also a vital legislation in mitigating climate change by reducing carbon emissions. It must be obtained before a commercial property is sold or leased.
- Landlords are now prohibited from granting new leases for commercial properties with an EPC below the minimum rating ‘E’.
However, some exemptions exist, and these are registered on the PRS Exemptions Register. It is only permitted to let non-domestic premises with an EPC rating of below ‘E’ if the cost of works required to bring the property up to standard would exceed the value of energy savings over seven years.
The most favoured EPC contract structure is the “full wrap” contract, which assigns an EPC contractor responsibility for all aspects of engineering, procurement and construction. Detailed testing and commissioning are often included in such contracts to ensure the system is functional to specifications upon completion and handover.
Who is Responsible For Obtaining an EPC?
When a building is offered for sale or rent, the seller and their agent must ensure a valid EPC is in place. This is also the case when the building is under construction or an air conditioning system is installed and still needs to be fully commissioned. The same rules apply to buildings regularly visited by the public and require a display energy certificate.
Landlords will need to take the time to work with their energy assessors and property managers to make sure that a valid EPC is in place for their buildings before they are put on the market for sale or rental. This will help reduce the risk of potential fines for breaching the regulations and allow for a plan of action to be implemented.
This is particularly important for existing landlords whose buildings may have a rating of D or below, as the new EPC requirements could mean that significant investment is required to bring the building up to a standard that meets the regulations. Completing this exercise before the requirement will allow for works to be planned and budgeted for and incorporated into the building’s planned preventative maintenance (PPM) schedule. This will help to keep the cost of maintaining the rating down over time.
What are the EPC Requirements For Commercial Properties?
An EPC is required whenever a building is constructed, sold or leased and must be available to potential buyers or tenants. It is also required to be displayed on the building.
From 2025, landlords cannot start new commercial tenancies in buildings with an EPC rating of F or G (subject to certain exemptions). For existing leases, landlords can continue to let the property if they implement energy-saving measures and increase the EPC rating to a minimum of E.
A good EPC rating can also enhance a property’s market value. This increases the income capitalisation value and may also reduce operational costs. Various factors determine a property’s market value, including location, modern amenities, architectural significance, and adaptability to technological advancements.
Landlords should take the time to gather information on their properties before having an EPC carried out. This information can help expedite the assessment process. This includes a complete list of all construction materials, year of construction and any significant modifications made to the building.
Listed buildings are generally exempt from EPC requirements if compliance would unacceptably alter their character or appearance. Other exemptions include places of worship, holiday properties and temporary buildings. If a building has several parts (or units) with standard heating systems, an EPC can be based on assessing a representative part or unit.
What are the Penalties for Non-Compliance?
If you’re a landlord, there’s no time like the present to start improving your properties’ energy efficiency ratings. These upgrades will make your rental properties more appealing to tenants and save you money in the long run by reducing heating expenses.
Under current regulations, it’s illegal to let a property with an EPC rating below minimum E. Landlords must normally undertake works to raise the EPC rating to at least E before they can let the property again.
However, several exemptions are available. You can find out more about these on the government website. In general, these exemptions are available if it can be demonstrated that the cost of the improvements needed to raise the EPC rating to minimum E would be greater than the expected value of savings on energy bills over seven years. There is also an exemption for listed buildings. However, this is qualified to specify that work to improve the energy performance of a listed building must not be carried out if it could unacceptably alter its character or appearance.
Regardless of the specific exemptions you claim, you must comply with the new regulations. Failure to do so can result in financial penalties, including fines of up to £30,000 for domestic properties. Fortunately, there are many funding options to help you meet these requirements, and property management software such as Landlord Studio can help you track all the expenses associated with your energy efficiency improvements.
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