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While there has been much in the news concerning escalating energy bills for consumers there has also been a big impact for businesses. “Candle-lit atmosphere” is becoming a slogan to attract consumers to dine out during the cost-of-living crisis whilst reducing a pub’s energy costs. However, not all businesses are able to reduce their energy bills by switching off the lights.
The regulations are tightening
Energy efficiency affects most commercial property transactions. Energy Performance Certificates (EPCs) have been around for many years now and under the Minimum Energy Efficiency Standards (MEES Regulations 2015) landlords of commercial premises within the scope of those regulations must not renew existing tenancies or grant new tenancies where the property has an EPC rating of less than E unless they have registered a valid exemption. From 1st April 2023, this is being extended so landlords must not continue to let current leases with an EPC rating of less than E. The government has stated that they expect the minimum standard to rise in the future; current proposals under discussion are that in 2027 premises will require a C rating and in 2030 a B rating.
Whilst improvements to buildings owned by a business occupier may be relatively straight forward, you should check your property title to see what you can and cannot do. It becomes more complicated in leased properties. There is a balance to be struck between the landlord and tenant. Tenants may see an immediate reduction in their energy bills and so be willing to undertake minor improvements but unwilling to fund a large and long-term energy project that will give no immediate benefit during their occupation. There are also issues as to what the lease says about the works a tenant may undertake and where in the building they are able to do so. The same goes for a landlord, which may wish to make improvements to the building, but if they have leased the whole building to tenants, they may not have the right to enter to carry out those works. Whether you are a landlord or a tenant, you should take specialist advice before starting any works.
Key takeaway
With the ever-increasing cost of energy and the clear message from the government to improve your property’s energy efficiency it might be time to see if you have a current EPC and pay attention to the findings in the recommendation report.
How CWJ can help you?
If you need assistance with reviewing a lease or drafting a lease to deal with potential issues relating to a property EPC rating, please contact a member of our commercial property team on 01689 887887.