EPC Commercial Confusion?

EPC Commercial Confusion?

9:18 AM, 24th February 2022, About 9 months ago 14

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I am in the process of renewing a lease with a commercial tenant for the next 6 years., The EPC conducted in Feb 2017 is an F (carried out by the previous owner just before we bought the property – the tenant was in situ at the time).

In April 2023 the EPC has to be a minimum E.

Can I continue to let till 2027 (current EPC expiry) on the F and then make changes to achieve an E
OR
Do I need to reach the E level by 1 April 2023?

Furthermore, as the unit was let empty, should the cost of any upgrades to the EPC be covered completely in part or wholly by the LL or the tenant?

Many thanks

DSR



Comments

AnthonyG

11:26 AM, 24th February 2022, About 9 months ago

As a landlord, my understanding is that the EPC and any property changes needed to achieve the legal minimum are the landlord’s responsibility and not the tenant’s, as fees to tenants are not legally permitted. The only way to have tenants cover it is through the rent.

Guy Couchman

12:21 PM, 24th February 2022, About 9 months ago

Hi, As it is a new lease then you need to have an EPC rating of E. Even though it is the same tenant and probably an identical worded lease but it is a new lease and that triggers the requirement. The April 2023 triggers if say you and your tenant had say a 10 or 20 year lease taken out before you bought in 2017 and runs into the furture. What the government didn't want is for landlords and tenants taking out long leases before April 2018 when the regulations came in and then being exempt for the next 10 or 20 years.
As for who pays then there is no defined rule i.e. there is no law that says the tenant has to pay and as they may say why should they it's not my building I just pay for the use (and repair for those on FRI leases). So it is normally down to the landlord but it all depends on your relationship with the tenant. The tenant will in theory be saving money as their gas and/or electric will be lower. Like all things especially with buy to lets in the residential side the tenant ends in effect picking up the bill of all the extra requirements and compliance by paying more in rent.
Hope that helps

Guy Couchman

12:38 PM, 24th February 2022, About 9 months ago

By the way as you are an F normally changing the lighting to LED will get most properties to an E. It is relatively cheap. You will have to get a new EPC done, depending on how far away you are a zone (simply put a room or area) may have changed and you may actually now be an E (it may also have got worse). However the assessor will know what you are looking to achieve and they can then model certain areas with different lighting (LED) and see how that improves and is enough to get you to an E. A good assessor will take the time and look at all areas rather than saying LED across the whole building. Likewise you can ask them about heating i.e. thinking ahead to the future where minimum may be a C rating. Cheapest EPC quote does give you the best result/information.

Neilt

13:23 PM, 24th February 2022, About 9 months ago

Reply to the comment left by AnthonyG at 24/02/2022 - 11:26
Where in commercial property letting law does it say "fees to tenants are not legally permitted", please?

Guy Couchman

15:21 PM, 24th February 2022, About 9 months ago

Reply to the comment left by neilt at 24/02/2022 - 13:23
I think he means if energy improvements are made to a building by the landlord, the tenant does not have to pay for these improvements and he cannot be forced to pay for them either.

Guy Couchman

16:46 PM, 24th February 2022, About 9 months ago

Reply to the comment left by Guy Couchman at 24/02/2022 - 12:38
Oops - on one of my posts above just at the end I meant to say 'Cheapest EPC quote DOES NOT give you the best result/information' - as they are less likely to spent the time. So get 2 or 3 quotes, ask what they do, how do they help you / work with you. Are there any that are recommended.

DSR

19:04 PM, 25th February 2022, About 9 months ago

Reply to the comment left by Guy Couchman at 24/02/2022 - 15:21
If as a LL I rent the unit as a shell, the tenant will choose to kit it out the their specific requirement. If the EPC needs to be updated to comply with a higher rating at some point during that contract then surely the costs is with the tenant? They are the only ones to benefit from any energy savings and therefore costs saved? If it were with the LL I would simply choose the cheapest option - but that may be to the tenants actual detriment?

Chris Byways

10:47 AM, 26th February 2022, About 9 months ago

I have similar situations, like many others with existing leases. Admit not yet read the Leases to see if stated who is responsible for paying for the EPC and work to bring up to a higher standard yet.
Gov EPC Register says:-
“Properties can be let if they have an energy rating from A+ to E.
If a property has an energy rating of F or G, the landlord cannot grant a tenancy to new or existing tenants, unless an exemption has been registered.
From 1 April 2023, landlords will not be allowed to continue letting a non-domestic property on an existing lease if that property has an energy rating of F or G.”
So, (1) is it mandatory for the EPC to be renewed before expiry with the same tenant?
(2) If a lease is silent, who would pay for upgrading on an FRI lease? (Depends one time left to run as who gets most benefit)
(3) if the rent is set, but new regulations mean considerable cost is involved, is LL still obliged to pay for remedial work even if lease endures beyond a new EPC’s life?

Graeme Paton

20:25 PM, 26th February 2022, About 9 months ago

In the EPC do both parts have to be C rating or just the energy Efficiency Rating part?
If only the first part is required what is the point of the Environmental report?
I asked a registered EPC provider and they were not sure.

Christopher Lee

6:36 AM, 27th February 2022, About 9 months ago

Reply to the comment left by AnthonyG at 24/02/2022 - 11:26
The Tenant Fees Act 2019 doesn't apply to commercial?

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