If you are a tenant taking a new lease or a renewal lease, or a landlord granting one, and the energy performance certificate (EPC) for your property provides a rating of F or G, you could find yourself on the receiving end of a hefty fine.
New regulations made in March this year provide that, in broad terms, a landlord cannot lawfully grant a lease of a commercial property from April 2018 if the property has an EPC rating lower than an E unless the landlord has carried out cost effective energy saving measures.
If the landlord doesn’t do this and it is not able to claim one of the exemptions set out in the rules, it risks a fine of between £5,000 and £150,000, depending on the length of non-compliance and the rateable value of the property.
Even though the rules don’t apply yet, a tenant may want to err on the side of caution and ask for wording in the lease to make it clear that the tenant will not have to pay for any energy saving measures required by the rules. This is just in case the landlord tries to pass his obligations on to the tenant under a common term in a lease about complying with obligations imposed by legislation.
However, another vital implication that a tenant must think through is whether it wants to sub-let the property after April 2018. If it does, the tenant becomes the ‘landlord’ under the rules. If the property has an EPC rating lower than an E, the tenant cannot lawfully grant a sub-lease unless it has carried out cost effective energy saving measures.
If a tenant is in this situation, it needs to be sure that it is able to carry out those measures under the lease terms, or be able to claim one of the exemptions. An important exemption for landlords under the rules is that, despite making reasonable endeavours, it cannot obtain necessary consents from the tenant, superior landlord, lender or planning authority, as appropriate. The standard exemptions last for five years and then must be claimed again.
The preferable route for the tenant is to ask the landlord to carry out works before the tenant enters into the lease to ensure that the EPC rating for the property will be at least an E. But how will a tenant know about the current rating?
A landlord is required to provide an EPC to a tenant before it takes a new lease. There is also an EPC register available online.
Inevitably, these issues will give rise to more pre-lease negotiations. If a landlord carries out the energy efficiency measures, the tenant will benefit through lower energy bills. Discussions on a higher rent will no doubt follow on.
And by the way, from 2023 the rules will apply to all let properties – so it will not be lawful for a landlord to continue to let a commercial property with an F or G rating unless the cost effective energy saving works are carried out, or an exemption is claimed.
 Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015
 The regulations will affect both residential and commercial properties but this blog is only looking at the implications for commercial properties.