2023 is predicted to be a tough year for some commercial developers and landlords as EPC requirements are tightened as part of the government’s goal of achieving net zero emissions by 2050.

The current Minimum Energy Efficiency Standard (MEES) Regulations prohibit new leases of commercial properties that have an EPC rating below E but, as of 1 April 2023, all tenanted commercial properties must also be rated E or above in order for the landlord to continue letting the property.

The change won’t impact all, with certain buildings exempt from the requirement to obtain an EPC including temporary buildings and industrial sites with low energy demand, as well as tenancies of less than six months (provided there is no option to renew) and tenancies for more than 99 years. However, of those that are caught, significant improvements may need to be made in order to meet the required standards, particularly when considering older properties. Whilst sometimes these can be as simple as updating to more energy efficient light bulbs, others are not so lucky and these improvements can be both costly and time consuming.

Furthermore, property valuers are taking into account EPC data and recommended works required to bring the property to the minimum standard, potentially impacting value and borrowability.
This, coupled with the cost-of-living crisis, leaves commercial landlords and developers with potentially significant outlays for improvement works to properties below the minimum standard, unless they are able to rely on one of the six exemptions outlined briefly below. Note it is not enough to simply qualify for an exemption – an exemption must be registered on the PRS Exemptions Register.