An EPC is an energy performance certificate. The certificate is provided by an assessor and specifies what a property’s energy efficiency rating is. The most efficient rating is an “A” rating, and the least efficient rating is a “G” rating. An EPC is valid for ten years from when it is registered on the EPC Register, and the expiration date is shown on the certificate.
An EPC is calculated by an accredited energy assessor who will inspect the property and complete a measured survey. The actual calculation is fairly complicated, but in basic terms covers the amount of energy used per square metre, as well as the level of CO2 emissions of the property.
EPCs take in building features such as:lighting- the amount of lighting as well as what types of bulbs (LEDs are more efficient)windows- as a general rule, the more glazing, the better EPC rating heating- this includes time and heat controls on thermostats, thermostatic radiator values and also covers aspects fuel typeinsulation- the assessor will look at how much insulation is required, as well as the type of wall that divides a property.
EPCs are required in commercial properties when they are built, sold, rented (this includes an assignment of an existing lease) and if alterations are made to a building which may impact its energy efficiency. These are also known as trigger events. Most EPCs are valid for 10 years.
The Minimum Energy Efficient Standard (MEES) Regulations do not currently allow new leases of commercial properties to be granted if the EPC rating is an F or a G. There are exceptions to this prohibition if an exemption applies or if improvement works are completed.
On 1 April 2023, landlords will no longer be able to continue to rent properties with an EPC rating of F or G (subject to an exemption applying).
It is important to note that the MEES Regulations do not apply to commercial properties with contractual terms of over 99 years, or with less than six months left on the term. The regulations also do not apply to properties with no EPC and where no trigger event occurs which would make an EPC a requirement.
If you purchase a property with an EPC rating below an E and it is subject to existing tenancies, landlords can apply for a temporary six-month exemption to make improvements to the property or apply for an exemption.
If an exemption applies, it must be registered on the Private Rented Sector Register and is valid for five years.
Four exemptions that may apply are discussed below.
First is exhausted energy efficiency improvements. A landlord can apply for this exemption if it has exhausted all the relevant energy efficiency improvements it can do on the property and the property still falls below the minimum rating. Relevant actions might include changing the light fittings, adding glazing, improving and/or installing insulation. Other improvements leading to improved energy efficiencies might include: fitment of a condensing boilercavity wall and loft insulationimproved glazinglow-energy light bulbsdraught- proofing windows and doorspipes and tanksreduction of water usageconsideration of renewable energy technology.
Second is permission. This exemption will apply when a landlord has yet to get the relevant consent from a third party whose consent is required for improvements. This may be when a landlord requires its tenant to consent to works being completed. It is important to note that a landlord must use reasonable efforts to get the relevant consent.
Third is economic inefficiency. This exemption will apply if the cost of making the relevant improvements is so expensive that the cost will not be recovered within seven years.
Fourth is devaluation.This exemption will apply if a landlord can show that improving the property to the required efficiency rating would cause a devaluation of 5% or more of the property’s market value. The landlord will require evidence from an independent surveyor to confirm the decrease in market value.
PENALTIES AND OUTLOOK
A breach of the MEES Regulations could lead to a financial penalty of up to £150,000 for a breach of letting restrictions, a financial penalty of £5,000 for providing false or misleading information or failing to comply with a compliance notice, or public exposure.
These upcoming changes are just the beginning; further proposals include raising the minimum EPC rating to a B by 2030, increasing triggers on when an EPC will be required, reducing the validity periods of an EPC and providing inspection powers to local authorities to monitor and check that a property, where required, has a valid EPC or exemption.
With the changes coming around quickly and further proposals planned, a landlord needs to take stock and consider what the changes mean. This includes, but is not limited to:reviewing your current properties/ leases and EPCsconsidering if any exemptions will apply and make the relevant applicationconsidering inserting green provisions into new leases.
BOX: TACKLING THE PERFORMANCE GAP
A new standard – BS40101 – was launched last year aiming to give building owners and users a framework for assessing and comparing building performance, and hence making improvements. At the launch, BSI said it “can help tackle a major issue in the built environment, which is determining the relative influence of design versus built performance in construction projects, known as the performance gap.”
Other stated benefits include: identifying and verifying more sustainable buildings, driving improved energy efficiency, informing the design of new buildings and the retrofit of existing buildings, investigating underperformance, providing data for ongoing measurement and monitoring to optimise performance, and helping promote a wider understanding of building energy efficiency performance.
The BS40101 standard, available via www.is.gd/burogu, is designed to take a multifaceted approach and be used at three levels of depth. It provides sets of questions, the data that have to be captured and the necessary granularity or frequency.
The standard also recognises the complexities of shared sites like a shopping centre or business park, looking at shared and individual services, the base building and its operation and the individual units or premises.
To make a start, interested parties should “gather the data” – which might come initially mainly from occupants. They might choose self-evaluation, self-evaluation with a peer check, or an external evaluation – a risk-based approach similar to auditing. Building performance data and performance improvement can be included in company environmental reporting as part of Scope 1 greenhouse gas reporting.