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What is an EPC?

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In today’s world, tackling climate change and reducing carbon emissions is a priority and there is a trend towards looking for more sustainable, energy efficient options in day-to-day life; from sustainably produced clothing to walking or cycling the commute to work. It has been said that buildings account for around 43% of the total carbon dioxide emissions in the UK. Accordingly, the Government is keen to motivate property owners to be aware of the energy rating of buildings and to improve their energy efficiency.

An EPC (Energy Performance Certificate) is a certificate issued by an assessor showing how efficient a building is from an energy usage perspective. Buildings are assessed on a sliding scale and graded from a rating of A (most efficient) to G (least efficient). EPCs are valid for 10 years. In the vast majority of cases, the assessor will include recommendations how to improve the energy efficiency of a property in a cost-effective manner.

Generally speaking, a property owner must have a valid EPC when marketing a property for rent or sale. There is a short list of exemptions to the requirement for having an EPC e.g. for places of worship, temporary buildings and buildings that are intended to be demolished.

For private rented properties, the minimum energy efficiency standard is currently rating E (unless a valid exemption applies). It is unlawful for a landlord to grant a new tenancy of commercial premises if a building is rated lower than E (i.e. rated F or G). Short term leases of less than 6 months, which do not run concurrently for more than 12 months, long leases of more than 99 years and licences to occupy (i.e. permission to use premises) are currently not caught by the regulations. In April 2023, the rules are being extended so that it will be unlawful for a landlord to continue to let commercial premises which are rated F or G. The Government intends to provide that a building must always have an up-to-date EPC during the whole period that it is let. This would mean that a valid EPC showing a rating above the minimum will be required when a landlord grants a renewal lease (current guidance suggests provision of an EPC is not required on a renewal lease).

Currently, if a landlord grants a lease without an EPC, or with an EPC showing a substandard rating, the lease will still be valid and enforceable however the landlord will open itself to the risk of enforcement action, including for commercial property financial penalties at 12.5% of the rateable value of the building (up to a cap of £5,000).

A Government consultation on increasing the minimum energy efficiency rating to B by 2030 has recently concluded and the outcome is awaited. It is likely that a large number of buildings will not meet this new minimum standard and that energy improvement works will be required. Whether a landlord can recover the costs of such works from the tenant will depend on the drafting of the new lease; or dictated by the level of rent payable under a new lease (it may be that the landlord can charge a higher rent for a more energy efficient property); or, if applicable, interpretation of provisions in the existing lease (in particular service charge provisions).

When thinking about preparing a property for selling or letting, it is important to take advice from a surveyor who specialises in this area to ascertain the relevant requirements, prior to commissioning an EPC (or allowing another to do so).

This blog is general information only and does not constitute legal advice. If you require advice on any of the issues raised, please contact a member of the Feldon Dunsmore team on 01926 954694.