08 February 2021 #Commercial Real Estate
In short a EPC is not required on renewal, the non-domestic EPC guidance makes that clear. As the guide published by the Ministry for Housing, Communities and Local Government’s (MHCLG’s) named “A guide to energy performance certificates for the construction, sale and let of non dwellings: Improving the energy efficiency of our buildings” (December 2017) states a lease renewal or extension is not a trigger for an EPC as the purpose of an EPC is to “enable potential buyers or tenants to consider the energy performance of a building as part of their investment”.
We will discuss the purpose and differences between the MEES Regulations and EPC Regulations below.
EPC Regulations 2007
The 2007 Regulations require an EPC on the grant of a lease. The guidance further states that the purpose of providing an EPC is for a prospective tenant to consider the energy performance of the property.
It is therefore reasonable to conclude that a "prospective tenant" does not include a person who is already a tenant. This makes sense in the context of the EPC regime, as the renewing tenant should already know about the building's energy performance of the property. An EPC would serve no real purpose in those circumstances and having to provide one would be a waste of time and money.
However, the MEES Regulations provide information only when there is a valid EPC currently in place as a result of the EPC regulations applying.
MEES Regulations on non-domestic dwellings
The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 established a minimum level of energy efficiency (MEES Regulations) for privately rented property in England and Wales. The Mees Regulations came into force on 1 April 2018.
It states that the landlord will only be required to obtain a new EPC if they intend to re-let the property (to the current tenant, or to a new tenant) once the current lease expires, or if they (or their tenant) modify the property in a manner which would require a new EPC. So for non-domestic properties the guidance is clear and an EPC is required on the renewal of a lease, if there was a valid EPC previously. However, oddly the MEES Regulations for domestic dwellings differ.
MEES Regulations on domestic dwellings (March 2019 version)
The regulations state that; the landlord will only be required to obtain a new EPC (which will trigger a need to comply with the minimum energy efficiency provisions) if they intend to remarket the property for let once the current tenancy expires, or if they (or their tenant) modify the property in a manner which would require a new EPC to be obtained. It is not exactly clear on how we are to interpret this, although it seems likely that a landlord would not remarket the property for let if a new lease were being granted to the current tenant.
It seems odd that the Department of Business Energy & Industrial Strategy would wish to distinguish between domestic and non-domestic property on the question of whether an EPC is needed on a lease renewal, or that such a difference would be intended.
EPCs and COVID-19
In April 2020 the Government released clear guidance on obtaining a valid EPC during the pandemic. Where it is possible to conduct an assessment safely, and complying with NHS guidance then assessments can be carried out. If this is not possible, than you should seek to do this when it is again safe to do so. However, it is important to note that obtaining an EPC is still a legal requirement and so if all reasonable efforts have not been made to obtain a valid EPC then action could be taken by enforcement authorities in line with the EPB Regulations.
Should you have any queries about EPCs then please speak to someone in our Commercial Real Estate team here at Clarkslegal who will be happy to help.