Whilst energy performance certificates were first required for commercial property in 2008 it is currently the case that in a little under 12 months properties with energy performance certificate ratings of F or G will not be capable of being offered to let in the open market (unless one of the statutory exemptions applies) unless first upgraded. Landlords owning properties which have not yet been assessed need to be mindful of both lease expiry dates and tenants who are in financial difficulty and may not last until the end of the lease and arrange for premises to be assessed now in order to consider and plan for the future. The ability of tenants to secure the energy performance assessments should not be overlooked by landlords facing rent reviews given in the majority of leases the rent falls to be calculated on the assumption that the premises are vacant and to let at the rent review date so it is in a tenant’s interests to demonstrate that a property does not meet the minimum threshold.
It is also pertinent to reflect on the fact that alterations to building regulations and more sophisticated energy assessment models developed over the last decade may result in premises which were assessed a number of years ago at band E or even band D now falling below the minimum threshold and with very few older leases prohibiting tenants from securing energy performance certificates on premises which they occupy. It is likely that tenants of national covenant strength will be quicker on the uptake in arguing that their rental bid will be reduced in relation to premises with an F or G grade rating by the equivalent of the rent free period necessary to execute the required improvements and savvy landlords are now seeking to grant leases which for rent review purposes include an assumption that the property can be lawfully let under the Minimum Energy Efficiency Standards, however this only covers the position moving forward. In respect of rent reviews arising over the next 12 months there is potential merit in seeking early professional advice in order to plan strategically and advance negotiations at an early stage to mitigate any potential impact.
Phil Dickins BSc( Hons) MRICS
Landlord and Tenant Department
Stratton Creber Commercial