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It is time to improve building efficiency

24 July 2013

It is time to take energy performance certificates (EPCs) seriously when renting or buying commercial property. New regulations for the private rented sector (which includes commercial property) will be brought into force no later than 1 April 2018. Under these regulations, buildings must be raised to a minimum energy efficiency rating before they can be rented.

Although full details of the regulations are yet to be published, it is expected that EPCs will be used to identify adequate efficiency levels.

Landlords and tenants should look at their leases now to consider how to implement energy efficiency improvements. Otherwise, landlords may not be able to let their buildings after 1 April 2018, without carrying out substantial and expensive improvements. Tenants may also be unable to sub-let.

A few points to consider are:

  • Is there an existing lease? If so, is the landlord’s consent required for alterations?
  • What energy efficiency improvements are needed or proposed? Are they likely to damage the investment value of the property or enhance it?
  • If the tenant wants to carry out energy efficiency improvements, do they propose to fund the works under a Green Deal plan? If so, would this period extend beyond the remaining term of the lease?
  • If the tenant wishes to make general alterations to the property, will they have an adverse impact on its energy efficiency?
  • Tenants are usually required to comply with statutory obligations affecting the property as part of their lease covenants. To what extent does this require a tenant carrying out repairs or dilapidations works, to take advantage of modern energy efficient designs and materials?
  • In making repairs, a tenant cannot be required to go further and improve the property. However, where the tenant is dealing with dilapidations, would it be sensible for the landlord to contribute to the cost to enable energy efficiency improvements to be made at the same time, thus reducing costs later?
  • What impact is there likely to be on rent reviews and existing leases if substantial energy improvement works are needed to the property to enable it to be let after 1 April 2018?

For more information please contact a member of our commercial property team. 

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Alasdair Garbutt LLB (Hons)
Partner
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Alasdair Garbutt
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