New guidance on minimum energy efficiency standards for non-domestic property

The government has released guidance on the operation of the regulations behind the minimum energy efficiency standards for non-domestic property. This is the law that provides that, from 1 April 2018, landlords may not grant a tenancy of non-domestic property to new or existing tenants if their property has an energy performance certificate (EPC) rating of band F or G, subject to exclusions and exemptions. From 1 April 2023, landlords must not continue letting a non-domestic property which is already let, if that property has an energy performance certificate (EPC) rating of band F or G, again subject to exemptions. There are separate regulations for domestic property.

The guidance provides a useful summary of the effect of the regulations. I set out below a few points of interest arising from the guidance.

• The guidance is not legally binding, and ultimately it is for the courts to give definitive interpretations of the law.

• Since the regulations only apply to properties which are let under a tenancy, non-domestic properties which are occupied under other arrangements, such as properties let on licence or ‘agreement for lease’ arrangements, are unlikely to be required to meet the minimum standard (band E).

• Landlords should be aware that nothing in the regulations interferes with the rights, validity or enforcement of a tenancy under any other legislation, such as Landlord and Tenant Act 1954 rights. So the landlord may not refuse consent to a statutory lease renewal on the basis that the property is ‘sub-standard’ (that is, it is rated F or G). Likewise, tenants may not use a landlord’s failure to comply with the minimum energy efficiency standards as a reason to prematurely terminate their lease.

• An EPC is valid for 10 years. Once an EPC reaches 10 years and expires, there is no automatic requirement to produce a new one. A further EPC will only be required the next time a trigger point is reached – that is, when the property is next sold, let or modified to have more or fewer parts than it originally had, and the modification includes the provision or extension of fixed services for heating, hot water, air-conditioning or mechanical ventilation. An EPC is also required on construction of a property.

• Listed properties, and buildings within a conservation area, will not necessarily be exempt from the requirement to have a valid EPC. If it is required to have an EPC, it will be subject to the regulations. However, an EPC is not currently required for a listed property or building within a conservation area when it is sold or rented, in so far as compliance with the minimum energy performance requirements would unacceptably alter its character or appearance.

• In situations where an owner or occupier of a building which is not legally required to have an EPC has obtained one voluntarily (that is, at any time other than when the property was to be sold, let or modified as mentioned above), the landlord will not be required to meet the minimum standard.

• There are exemptions from the prohibition on letting which must be registered on the PRS Exemptions Register. Importantly, the exemption will not pass over to a new owner or landlord on sale or other transfer of a property. So, if a let property with an F or G rating is sold or otherwise transferred with an exemption in place, the exemption will cease to be effective. The new owner will need to either improve the property to the minimum standard, or register an exemption where one applies if they intend to continue to let the property. From 1 April 2023, a temporary exemption of six months will apply from the date from which a person becomes the landlord on purchasing an interest in a property let on an existing tenancy.