Minimum Energy Standards for Commercial Premises
Energy Performance Certificates (EPC) who needs them? Just a formality, just ticking a box in the commercial conveyancing, commercial letting process? Money for old-rope?
If you thought that well, think again.
If I told you that, that, if minimum energy standards are not met from April 2018, you would not be able to grant a new lease of your premises; or that from April 2023 you will not be able to renew a lease to an existing tenant, would you believe it?
Probably not, I hear you say.
Well that is exactly what is going to happen.
To be able to let a commercial property after April 2018 a landlord will have to show that the premises has a minimum energy rating by way of an EPC (the minimum is likely to be E but this is not yet decided). It might be thought that this is not a very high standard but there are lots of premises that will struggle to meet this minimum standard.
A landlord needs to think about this now as any lease being granted for more than 7 years will be caught on renewal of that lease or on the granting of a new lease to a different tenant.
This will mean a gap in rental income whilst the premises are empty and work is carried out to bring them up to the minimum standard. This means a loss of revenue to the landlord and maybe a loss of business to the tenant if the tenant has to vacate the premises whilst the work is carried out. Who is going to compensate the tenant if this happens – well probably the landlord. No income from the property and a claim for loss of business from the tenant, who needs it?
In any new lease a landlord may wish to include provisions for the upgrading work to be carried out while the tenant is in the premises.
Who will bear the costs? Can the essential works be passed on to the tenant via the Service Charge? Who knows – it remains to be seen if this is possible. Funding may be available to a landlord through green deal schemes already in place or to be introduced but there is no guarantee that this can be done. Increase the rent? Maybe – a tenant may be more likely to pay a higher rent for an energy efficient building that has lower energy bills, who knows?
Whoever pays, the work will have to be done and it is better to start putting a plan in to place now rather than being re-active.
So what happens if the landlord does not comply? Well a landlord will find themselves faced with a fine for non-compliance and an order compelling the work to be carried out. It could mean that the rental value of the premises are diminished and the property harder to let and, of course a loss of revenue and maybe a claim from a disgruntled tenant!
Landlords – you have been warned and forewarned is forearmed.
© QualitySolicitors Copley Clark 2016