18% of non-domestic properties, and one in ten domestic properties, are in the very lowest EPC bands ('F' or 'G').

It is illegal for a landlord to grant a new lease with an EPC rating of 'F' or 'G' unless an exemption applies.

There are wide reaching implications here which will not only impact on the granting of commercial tenancies, but also in dealing with alterations carried out during the term of the tenancy.

From April 2018 commercial properties that have an Energy Performance Certificate will require a minimum EPC rating of E, prior to new lettings being completed. Unless relevant energy efficiency improvements have been carried out, Landlords could face:

A. financial penalties, and

B. in addition the need to implement improvements within 6 months.

The penalties are to be levied on a graded scale:

1. where the landlord is or had been in breach of the prohibition on letting substandard for three months or less at the time the penalty notice was served, a financial penalty of the greater of £5,000 and 10% of the rateable value of the property, subject to a maximum of £50,000, and

2. where the landlord is or has been in breach of the prohibition on letting substandard for three months or more at the time the penalty notice was served, a financial penalty of the greater of £10,000 and 20% of the rateable value of the property subject to a maximum of £150,000.

Energy performance upgrades will be required for properties which are subject to existing leases post 1 April 2023.

Given the risk to property owners it is clear that a full understanding of the energy efficiency of your property assets should be attained.

Action Points:

1. Review your existing portfolio;

2. Identify the problem properties;

3. Plan the solution;

4. Make your plan for properties already occupied by a tenant ahead of April 2023; and

5. Implement your plan.