Since April 1, 2023, it has been illegal to let or sublet a non-domestic – for instance, a commercial, industrial or agricultural – property if it has an energy performance certificate (EPC) rating of F or G. Usually, an EPC will be commissioned on sale or letting but undertaking substantial works also triggers the requirement for one to be undertaken.
The current EPC rules have applied to new lettings since 2018 but now apply to all lettings where an EPC is legally required – mainly those let on a lease or tenancy – even if there is no change in tenant or landlord.
However, a property doesn’t require an EPC if:
- It is listed or specially protected
- It is a place of worship
- It is a temporary building expected to be up for less than two years
- It is industrial, for example a workshop or an agricultural building with a low energy demand
- It is a non-agricultural building in a sector covered by a national sector agreement on energy performance
- It is a standalone building with a floor area of 50 square metres or less
- It is furnished holiday accommodation
- There is a proposal to demolish the property.
Following the changes, you cannot continue to let a non-domestic property unless it has an EPC rating of E or above, or an exemption has been registered. The exemptions work on a self-certification basis and there are several principal grounds for them:
- Works have been undertaken and the property is still sub-standard – i.e., below an E rating
- Any works would devalue the property by 5% or more in the opinion of a qualified surveyor
- The works would not meet the seven-year payback test – the high-value exemption
- Installation of external wall insulation would negatively affect the fabric or structure of the building in the opinion of a qualified person
- Lack of third-party consent e.g., tenant or planning consent
- You have unexpectedly become a landlord, for example through inheritance or purchase of a property which is let.
Each exemption lasts for five years, other than the last, which lasts six months, and the onus is on the property owner to manage their own exemptions. Importantly, exemptions do not transfer with a property so if there is a change in ownership, even internally between companies or trusts, a new exemption will need to be registered.
If it is found that your property is non-compliant and does not have an exemption, there can be a fine of up to £10,000 or 10% of the property’s rateable value.
Ways that landlords could consider increasing the EPC rating of their building include insulating the walls and roof, upgrading the boiler if the building has one, and investing in double or triple-glazed windows. Consideration should also be made as to the benefits of renewable energy for powering lights and any machinery, and upgrading the lighting to energy-efficient LED bulbs.
For more information, contact Stephanie Dennis on 01604 463372 or 07803 180388, email sdennis@hcrlaw.com or visit www.hcrlaw.com
