Subject to certain exemptions, it is already unlawful to let a property with an “F” or “G” rating.
Current proposals would require the minimum energy efficiency standard in relation to non-domestic buildings to be increased to a “B” rating by 2030. It is intended that there would be a stepped increase, so in 2027 the minimum standard would be “C”.
As from 1 April 2025 all non-domestic rented buildings would be required to have a valid EPC. Those without an EPC, or where the EPC has expired, would be required to lodge a valid EPC by 1 April 2025. From 1 April 2027, the minimum required rating would increase to “C” and a landlord would need to obtain a valid EPC with a “C” rating or above. There will be a substantial number of properties that do not yet have a “C” rating and significant investment is going to be required by landlords and tenants to bring properties up to spec.
Who will actually carry out and pay for improvement works will depend on the wording of existing leases, or on the negotiations with a new incoming tenant. It should be remembered that the legal obligation to provide an EPC with the appropriate rating falls on the landlord. Whilst a lease granted in breach of the regulations would not be invalid, the landlord would be liable to civil penalties including fines not exceeding £150,000. The stakes for landlords are clearly high. The Government is now also considering ways in which tenants can be made to take on their share of the legal responsibilities in complying with the regulations.
There are currently exemptions available for non-domestic properties but conditions must be satisfied and this must be recorded on the central register. The current exemptions are:
- There are no further relevant improvements
- Consent is required but cannot be obtained
- The energy efficient improvement would devalue the market value of the property (or the building it is in) by at least 5%
- A tenancy has been granted in exceptional circumstances
If a landlord continues to let by virtue of an acquisition (i.e. having purchased an occupied property) they will be given 6 months within which to comply with the regulations, including registering their own exemptions if any apply.
Given the need to consider climate change and our impact on the environment, it is unlikely that these proposals will be reduced in any meaningful way and we can expect them to be strengthened in years to come. This may include changes to the way in which properties are assessed and could lead to properties dropping down from previously assessed ratings.
*This is not legal advice; it is intended to provide information of general interest about current legal issues