Do you need an EPC for lease renewals? Key insights for commercial property owners

The Ministry for Housing, Communities and Local Government’s (MHCLG’s) “A guide to energy performance certificates for the construction, sale and let of non-dwellings: Improving the energy efficiency of our buildings” (December 2017) states that a lease renewal or extension is not a trigger for an EPC; an EPC is only required to be provided to a ‘prospective tenant’, as the purpose of the EPC is to “enable potential buyers or tenants to consider the energy performance of a building as part of their investment”.

Other property transactions that don’t trigger EPC requirements

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 established a minimum level of energy efficiency (MEES Regulations) for privately rented property in England and Wales. The Mees Regulations came into force on 1 April 2018.

The regulations for commercial property suggest that if there is no valid EPC for the property, one would be required on re-letting the property to the current tenant. Oddly, and without much clarification, the regulations for residential property state that a new EPC will only be required if the landlord intends to remarket the property for let once the current tenancy expires, or if the re-letting tenant has modified the property in a manner which would require a new one to be obtained. It is not clear exactly what remarket means, however it is possible that a landlord would not remarket the property if a new lease was being granted to a current tenant.

Whether the difference between residential and commercial property requirements is intended by the Department of Business Energy and Industrial Strategy is unclear; however the commercial guidance has not been updated as recently as the residential guidance, and these may in time be brought in line.

Are there any other property transactions which do not trigger the EPC requirements on sale or letting?

• Lease extensions
  • A new lease to the same tenant, a reversionary lease to the current tenant, (and potentially) an overriding lease granted to an existing tenant. These are justified in the same way as for a lease renewal.
• Compulsory Purchase Transactions
• Grant of an easement
  • This is over property, rather than a sale of the property itself, so would not trigger a requirement for an EPC.
• Variation of a lease which is sufficiently extensive to amount to surrender and regrant
  • It is arguable this would be equivalent to a standard surrender and renewal, and so would likely not trigger the requirement for an EPC.

The above list is not exhaustive; the key consideration is whether the action, including the land, amounts to a sale or a letting. If neither of these are met, it is unlikely an EPC will be required.

Need guidance? Contact our commercial real estate team

If you have any queries about EPC requirements or need tailored advice for your property transactions, please reach out to our commercial real estate team. We’re here to help you navigate the latest regulations and ensure compliance.