Commercial Properties: Meet Energy Standards, Or Get Fined, Says UK Gov
New legislation has been introduced in England & Wales which sets a minimum energy efficiency standard that landlords and lease-owners of commercial properties must achieve. This drive supports the government’s pledge to lower the nation’s CO2 emissions.
Gone are the times of ‘anything goes’ in relation to how energy efficient your property is.
Your Property’s Rating
The EPC (Energy Performance Certificate) was introduced in 2007 and is a measure of how energy efficient your property is. The ratings go from ‘A’ being the most efficient, to ‘G’ being the least.
Statistics from the national EPC register show that 20% of commercial properties are rated ‘E’ and 18% are rated ‘F’ or ‘G’.
Regulations and deadlines
Properties rated an ‘F’ or ‘G’ will have no choice but to make improvements to increase their EPC rating as of 1st April 2018.
From 1st April 2023, financial penalties will be incurred for all non-domestic, privately rented properties (where a lease is already in place and a property is occupied) that fall under the scope for an EPC, that fail to meet the EPC rating of ‘E’ or above.
Don’t get caught out
Two years is surprisingly a short amount of time until properties come under scrutiny, especially when factoring in plans to mitigate risks.
Some properties will require more attention than others, so it is a case of being fully ‘in-the-know’ about what your property is currently rated, what the most cost-effective options are and how long it will take.
Penalties for non-compliance will range from maximums of £5000 to £150,000 (20% of rateable value). Read the Gov.UK website here.
Exemptions are made, however, where it is deemed unsuitable and not cost-effective, where improvements would devalue the property by more than 5%, or for properties which are exempt from having an EPC. Read more.
The business case
Reducing energy waste and cutting costs helps businesses remain competitive.
“It’s a smart move for businesses to bring significant cost reductions to their business, especially those that outweigh initial investment, if any required” Mr. Banks explains.
With the government wanting to meet targets set to reduce CO2 emissions by 20% in 2020, businesses will see more and more of these legislations passed and are advised to plan ahead.
Who is responsible?
Landlords, but depending on the terms of the lease, some businesses leasing property with poor EPC ratings could be liable too. A tenant could be obliged to pay for and carry out the works.
In addition, non-domestic landlords will not be able to unreasonably refuse consent from a tenant for energy efficiency improvements that require no upfront or net costs.
Businesses now more ‘energy aware’?
Duncan Banks, CEO of energy consultancy IU Energy, says:
“The new EPC legislation is significant in that it sets national standards, forcing companies to acknowledge their level of efficiency and take action. For the latter, this is the first of its kind.”
But there is still a long way to go:
“Despite this being a step in the right direction, we still see many businesses and landlords who are reluctant to realise energy efficiency as a core cost-cutting exercise.”
This is because many businesses are unaware of the wide range of cost-effective solutions, many available through finance and/or with no upfront costs. You can request a free energy health check from IU Energy here.
Other existing regulations
UK businesses have already seen the implementation of ESOS – the government’s mandatory ‘Energy Savings Opportunities Scheme.’
This scheme demands large businesses (as specified by the scheme) submit an in-depth energy review of their premises and vehicles, completed by a specialist, outlining opportunities for energy efficiency measures.
The first final deadlines were in early 2016 and are required every 4 years, with hefty fines being imposed for non-compliance. Read more.