08 February 2021 #Commercial Real Estate
The question of whether an EPC (Energy Performance Certificate) is required on a renewal lease is open to interpretation. The short answer is probably for commercial property regulations (non-domestic) but not for residential property regulations (domestic), but it is by no means clear. This is because, in part, the MEES Regulations (Minimum Energy Efficiency Standards) and EPC Regulations contradict themselves regarding this very question and we will see how they both differ 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, further developments in the regime and the release of the MEES Regulations provide for conflicting guidance on the need for a new EPC on the renewal of a lease.
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.
The guidance to the MEES Regulations published by the Government gives examples of when a landlord must obtain an EPC. 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. 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, then 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 EPc Regulations.
Should you have any queries about EPCs then please speak to someone in our Real Estate team here at Clarkslegal who will be happy to help.