EPCs: What Commercial Property Owners Need to Know as the Rules Tighten

Energy efficiency is no longer a background compliance issue for commercial property owners. With tougher enforcement already in place and significant reforms on the horizon, Energy Performance Certificates (EPCs) now have a direct impact on whether a building can be lawfully let, its marketability and, ultimately, its mortgagability. For landlords, investors and occupiers, understanding the EPC regime has become essential rather than optional.

What is an EPC?

An Energy Performance Certificate (EPC) measures the energy efficiency of a building from “A” (most efficient) to “G” (least efficient).  Energy assessors award the building a rating and provide an EPC confirming the rating, together with suggestions for upgrades, which is valid for 10 years and can be viewed online.  

When is an EPC required?

Under the Energy Performance of Buildings (England and Wales) Regulations 2012, an EPC must be provided in the following circumstances:

• you sell or rent out your premises;
• the premises was under construction, and this has now finished; or
• you change the layout of the building so that different parts are used for occupation and you have fixed heating, air conditioning or mechanical ventilation.

Additionally, you must display an EPC by fixing it to your commercial building if all of the following apply:

• the total useful floor area is over 500 square metres;
• the building is frequently visitedby the public;
• an EPC has already beenproduced for the building’s sale,rental or construction;

You can be fined between £500 and £5,000 based on the rateable value of the building if you do not make an EPC available to any prospective buyer or tenant.

Certain buildings may be exempted from requiring an EPC including where:

• it is listed or protected and the work to bring the premises up to an energy efficient standard would alter its character or protective features unacceptably;
• it is temporary (use for <2 years);
• it is a detached building with a total floor space under 50m²;
• it is a place of worship or used for religious activities;
• it is an industrial site, workshop or agricultural building (non-residential use) with a very low energy output; or
• you are due to demolish it, and you have the relevant planning consents.

Minimum Energy Efficient Standards (MEES)

In addition to requiring an EPC in the above scenarios, the Minimum Energy Efficiency Standards (MEES) Regulations, as of 1 April 2023, impose ongoing obligations on Landlords. All privately rented commercial premises must have an EPC rating of “E” or above for new and existing tenants.  

If your EPC rating is below “E” with no valid exemptions, the landlord must carry out energy efficient improvements to bring the property up to the minimum standard.   

Exemptions to the minimum standard include:

• the cost of the required improvements exceeds the value of the energy savings over a 7-year period;
• the works would reduce the property’s value by more than 5%, supported by appropriate evidenced; or
• the property is listed and required improvements would unacceptably alter its character.

What happens if landlords do not comply?

Failure to complywith EPC and MEES requirements can result in substantial financial penalties. The maximum penalties are as follows:

(a) Where the landlord has let a sub-standard property and has been in breach for <3 months at the time the penalty notice is served: up to £5,000, or up to 10% of the rateable value of the property (whichever is greater), subject to a maximum penalty of £50,000.
(b) Where the landlord has let a substandard property unlawfully and has been in breach for 3< months at the time the penalty notice is served: the greater of up to £10,000 or 20% of the rateable value of the property (whichever is greater), up to a maximum of £150,000.
(c) Where the landlord has registered false or misleading information on the PRS Exemptions Register: up to £5,000 and potential publication of the sanction (available to view by the public for a minimum period of 12 months).
(d) Where the landlord has failed to comply with a compliance notice: up to £5,000 and, again, potential publication of the sanction.

In addition, details of non-compliance may be published on the public register.

What reforms are on the horizon?

Since 2020 the government has been consulting on Reforms to the Energy Performance of Buildings Regime, aimed at improving building standards and supporting wider Net Zero target.

• Requiring a valid EPC for the entire rental period. Currently, if the same tenant renews or extends, a new EPC is not required. The government have confirmed that they intend to publish a confirmation on this point in 2026.  

• Ensuing a building is not marketed for rent or sale without an EPC readily available, as opposed to the 28-day period currently allowed to obtain an EPC after marketing.  Having had positive feedback from the consultation, the government have confirmed that they intend to update the regulations so that an EPC is required at the point of marketing the premises.

• Raising the minimum standard rating from “E” to “C” for new tenancies and introducing a new set of performance metrics.  The government have confirmed that private landlords of all tenancies (i.e., new and existing) will be required to meet the new minimum standard of “C” by 1 October 2030.   This comes with a significant cost implication for landlords, as they will be required to invest up to £10,000 on energy efficient improvements to bring their premises up to the minimum standard.

It is important for landlords to keep up to date on the current and future updates to energy efficiency regulations to ensure they remain compliant and avoid sanction. In addition, having an EPC readily available on sale/rent assists in negotiation with tenants and can assist in a smoother transaction.

Holmes & Hills specialist Commercial Property Department can assist you in navigating your responsibilities when selling or renting.