Commercial property – EPC clarity required?

by Readers Question

11:09 AM, 18th November 2020
About 2 weeks ago

Commercial property – EPC clarity required?

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Commercial property – EPC clarity required?

I have commercial premises currently let to a tenant, and they use it as a dance school. Current lease comes to an end in December (we purchased the property with her as a sitting tenant and this original lease has an end date of Dec 2020), but we have no hesitation in leasing it again to her probably for 3-5 years on a rolling contract.

I have just checked the EPC. Issued in 2017 (just before we purchased the building) and rated F.

Can I actually re-let as it is lower than an E? Is a Dance Studio exempt as I think it comes under Class E(d) commercial classification?

Can anyone help with some advice on this, please?

Reluctant Landlord


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Comments

Freda Blogs

13:12 PM, 18th November 2020
About 2 weeks ago

I can’t advise on your EPC Q, however my concern arises from your suggestion to relet, probably on a rolling contract. I am hoping that you are familiar with the differences between commercial vs residential leases and the possible impact of the Landlord and Tenant Act 1954 among other things? If not, I strongly advocate that you take proper advice from a commercial property solicitor before you go any further with a reletting.

Apologies if you are familiar with commercial leases and my suggestion is unnecessary or unwelcome.

WP

13:23 PM, 18th November 2020
About 2 weeks ago

Reply to the comment left by Freda Blogs at 18/11/2020 - 13:12
I'll be honest this is a legacy contract that has landed in my lap...I was not party to original let or contract and yes I am only really used to residential lets....where to start???

Freda Blogs

15:12 PM, 18th November 2020
About 2 weeks ago

Reply to the comment left by WP at 18/11/2020 - 13:23
Ask a local commercial property solicitor and/or valuer to advise. You may be able to get a 30 min free advice session with a property solicitor. Good advice will pay for itself if you are unfamiliar with commercial property and the bear traps that may otherwise come your way.

Darren Peters

10:03 AM, 19th November 2020
About 2 weeks ago

Just commenting to reiterate what Freda said, get a commercial solicitor to draw up a new Lease. It's a much more complicated document and arena than an AST.

Tom Pope

10:08 AM, 19th November 2020
About 2 weeks ago

Hi, as a commercial EPC assessor, I can offer some insight. Currently you are not allowed to sign a new lease or lease extension with an EPC rating below E. I always advise to check EPC first, next step would be to have your own EPC survey carried out but not produce the EPC yet. The assessor will be able to advise how to improve the rating before lodging the EPC on the register. Often there are fairly easy to implement measures that can improve the rating.

WP

10:13 AM, 20th November 2020
About 2 weeks ago

Reply to the comment left by Tom Pope at 19/11/2020 - 10:08
Thanks Tom - a bit of insight there 🙂 There is a secondary sheet with a list of some recommendations but I just need to understand which ones to immediately address to get the property over the min line to the level E. We have a longer term plan for other measures to be put into place but clearly that wont be done before December.

Tom Pope

11:12 AM, 20th November 2020
About 2 weeks ago

Reply to the comment left by WP at 20/11/2020 - 10:13
Hi, the only way of quantifying the effect of making improvements will be contacting the original assessor and discuss with him / her, or have a new assessment carried out under your instruction and make the requirement a part of your instruction. The original assessor may or may not assist as he was originally instructed by the previous owner, hope this helps

WP

17:47 PM, 20th November 2020
About 2 weeks ago

Reply to the comment left by Tom Pope at 20/11/2020 - 11:12
just contacted the original assessor to ask if this is possible. At least this way it will be a true assessment of the status of the property when the EPC is actually lodged on the register. Thanks for the advice 🙂
Is there a formal time period within which the assessment takes place and the report must be officially logged?

Hedley

12:19 PM, 21st November 2020
About A week ago

I agree regarding the EPC with the comments of Tom Pope. As to the lease, the tenant is protected by the Landlord & Tenant Act 1954 (as amended). As the current lease expires in December and it is now November, the tenancy will continue (unless the tenant leaves - the tenant can just leave if she wants to) until one or other gives the appropriate notice. That notice must be served, if by the landlord, in a specific format under section 25 of the Act and you would be well advised to instruct a Chartered Surveyor to do this. The notice to be served must be served not less than 6 months nor more than 12 months. You will need to specify the terms, including the rent required, in that notice. The surveyor will also be able to advise on and conduct any negotiations if you wish.
Lastly, if you do not serve notice and the tenant doesn't leave, the lease will hold over (continue) indefinitely on the same terms and rent as the current lease.

Hedley

12:34 PM, 21st November 2020
About A week ago

I should have mentioned that, if you let the lease hold over it is not a new letting or renewal lease and my opinion is that it doesn't at this stage require immediate action to bring the EPC rating up. I would advise letting the lease hold over for now and get the EPC works sorted.

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