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Utilities & Environmental

Do you lease a commercial property?

By 26th January 2018April 4th, 2019No Comments

Commercial leases April 2018 onwards

Energy Performance Certificates (‘EPC’) rate the energy efficiency of a building on a scale of A-G, with G being the least efficient.  The Minimum Energy Efficiency Standards 2015 (‘MEES’) set minimum efficiency standards for domestic and commercial properties.  Property which falls within the scope of MEES will be regarded as “sub-standard” if the property fails to meet an EPC rating of ‘E’ or better.  The following sanctions will apply to sub-standard properties:

  • 1 April 2018 – it will become an offence to let (including renewals and extensions) any sub-standard commercial or residential property (i.e. new leases)
  • 1 April 2020 – it will become an offence to continue to let/lease any sub-standard residential property (i.e. existing leases);
  • 1 April 2023 – it will become an offence to continue to let/lease any sub-standard commercial property (i.e. new and existing leases).

Fines will apply for non-compliance, varying between 10%-20% of the property’s rateable value.

N.B. MEES can also apply to tenants who sub-let all or part of a property.

Must I have an EPC?

Every leased building which legally requires an EPC will fall within MEES, however some commercial properties might be exempt from the requirement to hold an EPC if they are:

  • listed or officially protected and meeting the minimum energy efficiency requirements would unacceptably alter the building
  • a temporary building used for <2 years;used as a place of worship or for other religious activities;
  • an industrial site, workshop or non-residential farm building that uses very little energy (i.e. unheated);
  • a detached building with a total floor space of <50 sq. metres;
  • due to be demolished and all the relevant planning/conservation consents have been granted;
  • due for demolition and the site could be redeveloped;
  • the buyer or tenant has applied for planning permission to demolish;
  • due to be sold or rented out with vacant possession;
  • furnished holiday accommodation (as defined by HMRC) and the holidaymaker is not responsible for paying the energy costs.

Can I claim exemption from MEES?

Landlords can apply for a 5 year MEES exemption to a sub-standard property if any of the following apply:

  • The ‘Golden Rule’ – an independent assessor determines that all appropriate energy efficiency improvements have already been made or that the cost of further improvements would take longer than seven years to be recouped through energy savings.
  • Devaluation – an independent survey determines that any appropriate energy efficiency improvements are likely to reduce the value of the property by >5%.
  • Third party consent – consent from tenants, another landlord or planning authorities has not been forthcoming or has been granted with unreasonable conditions attached.
  • Individual circumstances can be complicated as more than one regulatory framework might apply.  Guidance for commercial landlords can be found here.

The information contained in this article is for discussion purposes only. Auditel does not offer regulatory or legal services and qualified professional advice should be sought where appropriate.

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