
26.09.2022
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By April 2023 any landlord seeking to lease a commercial building needs to ensure its Energy Performance Certificate (EPC) rating is E or better. This is only the start of an incremental tightening of energy efficiency ratings for leased commercial properties, with a EPC C rating expected to be required by 2027, increasing to B by 2030.
The carbon emissions of the UK's existing commercial and residential buildings are considerable, so undoubtedly efforts need to be made to make the existing building stock more energy efficient, whilst at the same time creating new energy efficient buildings. However the increasing EPC thresholds will create challenges for commercial landlords, particularly as they apply to existing and new leases, and come at a challenging time anyway in respect of energy costs.
Some buildings can be exempted from the EPC requirements on the basis of viability or where they are listed buildings where it can be demonstrated that the changes needed to achieve an increased EPC level would require alterations to the building's fabric and character which would be unacceptable from a heritage point of view. There are however strict regulations around exemptions, which only then apply for a specific amount of time.
The key question for many landlords will therefore be whether it is viable or feasible to retrofit buildings to create the improvements necessary to meet the increasing EPC thresholds, or whether an alternative option of rebuilding or seeking a new use is required.
Many of the changes which would typically be required in order to retrofit buildings to improve the EPC rating will include roof and wall insulation, glazing and draught reduction, and more energy efficient heating and lighting. For many buildings those improvements will be achievable, although landlords will need to review the ability to make those changes and improvements not only to meet the imminent increase in standards but also the future increases in 2027 and 2023.
However in some cases there will be a limit to what energy efficiency measures can feasibly or viably be introduced to a particular building. One option in that respect, although one which comes with a cost of its own, is to rebuild commercial premises in order to allow a comprehensively future proofed level of energy efficiency to be achieved. There have however already been examples where planning authorities are taking account of the embodied carbon within existing buildings and are resisting a demolition and rebuild process despite that resulting in a much more efficient building overall. In our view the rebuild option remains a realistic option, but will require a considered justification to set out to local authorities the sustainability benefits and any other benefits arising of that strategy.
If a rebuilding approach is not feasible, then the inability of a building to viably comply with the EPC thresholds could form an important consideration for local authorities when considering applications for the redevelopment or change of use of commercial sites to other uses. There are also various permitted development rights which in some circumstances allow the change of use of commercial buildings. The reuse of well located commercial sites for housing can continue to provide an important supply of homes on brownfield sites, particularly where it can be demonstrated that the commercial buildings will made obsolete in sustainability terms by the increasing EPC thresholds.
For more information on the prospects for commercial buildings please contact David Harvey in our Maidstone office or Jonathan Buckwell in our Gatwick office
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