What commercial property landlords need to know about energy efficiency changes from April 1st

Released On 2nd Apr 2023

From 1st April 2023, landlords will not be able to continue renting commercial premises where the Energy Performance rating of those premises is an F or G, unless an exemption applies.

Since 2018, it has been unlawful for landlords to grant new leases for both commercial and domestic properties with a substandard energy efficiency rating of less than an E. Since 2020, it has been unlawful to continue renting out residential properties with an F or G rating.

From April, it will be unlawful to have a tenant of a commercial property with a substandard energy efficiency rating of less than an E from April with a potential fine of up to £150,000 for landlords who breach this.

Landlords should have an assessment carried out and undertake works that can be done to improve the energy efficiency of the building. If the premises still do not meet the minimum E rating, it may be that one of the following exemptions applies:

The cost of the works required to improve the premises are not cost-effective, or despite carrying out all of the possible improvements, the premises remain below an E. The works are considered not cost-effective if the works do not pay for themselves out of the projected savings in energy bills over a 7-year period.
If the works required to improve energy efficiency would devalue the property by more than 5%.
If the works require consent that cannot be obtained despite using reasonable efforts such as planning permission or possibly if the tenant refuses access for the works to be carried out.

If the landlord believes that the criteria for one of the exemptions applies, they will need to register the exemption on the Exemption Register with the evidence required for that exemption type. The exemption entry will last 5 years and then further efforts must be made to improve the energy efficiency.

It is proposed that this is just the start of raising minimum energy efficiency standards. From 1 April 2027, it is proposed that commercial properties will have to have a minimum rating of a C and from 1 April 2030, a B.

Landlords should ensure that their commercial premises are compliant by 1st April 2023, or they have registered an exemption.