A Guide to Commercial Property EPC Ratings

In the modern business world, Energy Performance Certificates (more commonly known as EPCs) are extremely important. Not only do they measure how efficiently a business uses its energy, but they’re a legal requirement. It is a business owner’s responsibility to apply for and pay for an EPC. Unless you are exempt from needing one, you may face a penalty charge if you don’t. 

What Are EPC Ratings?

A Commercial EPC (Energy Performance Certificate) is required for every commercial building when it is constructed, sold or let. The EPC gives information about the energy efficiency of the building to owners, prospective buyers and tenants. Some buildings will be exempt from needing an EPC Certificate.  

Understanding EPC Ratings

An EPC displays a commercial building's energy efficiency grade. EPCs are graded on a scale of A-G. The best result is an A grade (most efficient), and the lowest is G (least efficient). The rating graph is similar to the labels you see attached to new appliances such as refrigerators and washing machines. 

How is an EPC for Commercial Property Calculated?

Commercial EPCs function similarly to the energy labels on new appliances, offering a clear and colour-coded snapshot of a building's energy efficiency. They rate a building's energy performance on a scale from A, signifying high efficiency, to G, indicating low efficiency.  This rating is achieved following a meticulous study of your business energy practices by a qualified assessor who will take the following into account: 

Initial Assessment

The assessment begins with a thorough inspection of the commercial property concerned. This initial phase involves analysing the building's dimensions, design, construction techniques, and chronological age, all of which are foundational factors that influence energy efficiency.

Evaluating Key Components 

Having completed an overall assessment of the premises concerned, The assessor then delves into the core systems within the building:

• Heating Systems: The building's heating systems' efficiency, type, and control will be evaluated for their energy consumption patterns.

• Cooling Systems: Any cooling apparatus, such as air conditioning units, will be reviewed for their efficiency ratings and operational mechanisms.

• Ventilation: The building's ventilation strategies will be examined to understand their role in maintaining energy efficiency.

• Lighting: The types of lighting, with a focus on those in communal areas, will be assessed to gauge their energy efficiency levels.

Insulation Analysis

Insulation is critical to energy efficiency, so the assessor will pay special attention to the amount of energy that your premises may be losing, including: 

• Wall Insulation: The materials, thickness, and installation of wall insulation will be tested.

• Roof Insulation: Insulation presence and quality in roof or attic areas will be evaluated.

• Window Types: The types of windows, such as double-glazing, are considered for their thermal retention capabilities.

Energy Consumption and Emissions 

Your business energy consumption and emissions will also be scrutinised, including:

• Energy Use: Available data on the building's energy consumption will be collected to understand usage patterns.

• Carbon Dioxide Emissions: CO2 emissions will be estimated.

• Renewable Energy Integration: Where applicable, the use and efficiency of renewable energy systems will be assessed.

Software-Powered Analysis

Once all this data has been collected, the assessor will feed it through advanced analytical software which calculates the property's energy efficiency by cross-referencing the results for your premises against established benchmarks, resulting in the EPC rating.

The EPC rating, therefore, provides a snapshot in time encapsulating the physical attributes of the building and the operational habits of its occupants. It also recognises that actual energy usage significantly alters the final score.

When Do You Need an EPC?

All commercial properties let or sold in England or Wales must have an EPC score. The UK government specifies that all commercial properties must have an EPC if: 

• You rent or sell the property 

• The construction of a new building has been completed

• Changes have been enacted in building use that affect heating, air conditioning, or mechanical ventilation systems.

EPC Requirements for Commercial Property

Commercial EPC requirements are derived from Minimum Energy Efficiency Standards (MEES), a framework mandated by the UK government to ensure commercial and residential buildings meet energy efficiency standards. MEES has significantly reshaped the landscape of energy performance in commercial real estate, and understanding EPC requirements has become a key component of renting or selling commercial property. 

Regulations and Legal Requirements

The regulations and legal requirements surrounding EPCs are constantly evolving, but as of 1 April 2023, it's mandatory for all privately rented non-domestic properties to have an Energy Performance Certificate (EPC) rating of E or above. This rule applies to all leases, encompassing new and existing agreements. Leasing out properties with an EPC rating below E (F or G) is now prohibited, affecting new and existing tenancies. 

Upcoming Changes in MEES Regulations

These changes to the law will only get stricter over the coming decade, with two further big changes planned. 

Minimum ‘C’ Rating for Commercial EPC in 2027

By 2027, all non-domestic rented buildings must have improved the building to an EPC rating of a ‘C’ or above or have registered a valid exemption. 

Minimum ‘B’ Rating for Commercial EPC in 2030

By 2030, all non-domestic rented buildings must have improved the building to an EPC rating of a ‘B’ or above or have registered a valid exemption. 

When You Must Display an EPC

You must display an EPC by fixing it to your commercial building if all these apply:

• The total useful floor area is over 500 square metres

• The public frequently visits the building

• An EPC has already been produced for the building’s sale, rental or construction

Costs Associated with Obtaining a Commercial EPC

The price of a commercial EPC depends on the size and complexity of the building being evaluated but typically ranges from £150 to £500, and once obtained they’re valid for ten years. 

Responsibilities: Landlord vs Tenant

The landlord is typically responsible for obtaining an EPC, but if a tenant changes the energy performance, they may need to obtain an EPC themselves. 

Impact of EPC Ratings on Commercial Properties

EPC ratings can significantly affect your business and its operations. Of course, having one is a legal requirement, and you can be fined between £500 and £5,000 based on the rateable value of the building if you do not make an EPC available to prospective buyers or tenants. 

But it doesn’t end there. A higher EPC rating can have a significant effect on your property’s value if you own it, and if you’re a commercial landlord, it can also have a dramatic effect on the rental prospects of a property. In short, people tend not to want to rent premises which will have potential costs for them further down the line. 

How Much Does a Commercial EPC Cost?

The price of a commercial EPC depends on the size and complexity of the building being evaluated but typically ranges from £150 to £500, and once obtained they’re valid for ten years. 

How to Get a Commercial EPC

To acquire a Commercial EPC for your premises, follow these steps:

Locate a Commercial Energy Assessor: Find an assessor specialising in commercial properties. You can search online via the UK government's commercial accessory registry, or consult directories from accreditation schemes specialising in commercial energy assessments.

Arrange the Assessment: Contact the chosen assessor and schedule a time for them to evaluate your commercial property. Be prepared to provide access to all building areas and relevant documentation, such as building plans or previous energy reports.

Undergo the Inspection: The assessor will inspect various features of your property, including heating and cooling systems, insulation, windows, and lighting, specifically focusing on aspects relevant to commercial buildings.

Review the Report: After the inspection, the assessor will produce a detailed report that includes your property's EPC rating and suggestions for enhancing energy efficiency tailored to commercial premises.

Receive Your EPC: The final EPC will be provided. It's valid for ten years and should be made available to any prospective buyer or tenant when selling or leasing the property. 

Display Requirements: If your commercial building has a total useful floor area of over 500 square metres and is frequently visited by the public, you're required by law to display the EPC prominently. 

Exemptions

Under Minimum Energy Efficiency Standards (MEES), there are specific circumstances where a commercial property can be exempt from meeting the required Commercial EPC ratings.   

All Improvements Made

An exemption can be registered if all possible energy efficiency improvements have been made and the property still doesn't meet the minimum EPC rating. To gain this exemption, you must provide documentation proving that all relevant improvements have been undertaken.

Devaluation Exemption

If improvements necessary to meet the minimum EPC rating would decrease the property's market value by more than 5%, an exemption can be claimed. You'll need a report from an independent surveyor to support a claim for this exemption. 

Temporary Exemption for New Landlords

New landlords can claim a temporary exemption for a period of six months under certain circumstances. You'll need proof of the date when you became the landlord and the qualifying conditions for the exemption. 

Consent Exemptions

If consent from tenants, mortgagees, or other parties is required for energy efficiency improvements and such consent is denied, or is given with unreasonable conditions, then you can apply for an exemption. Written evidence of the refusal or the unreasonable conditions attached to the consent must be provided. 

Listed Buildings and Certain Protected Properties

Listed buildings or properties in conservation areas might be exempt if compliance with minimum energy efficiency requirements would unacceptably alter their character or appearance. Documentation confirming the building's listed status or location in a conservation area, along with an expert assessment of the impact of compliance.  

Seven-Year Payback Test

If the expected payback period for energy efficiency improvements is more than seven years, this can be grounds for an exemption. You must provide detailed financial calculations demonstrating that the payback period exceeds seven years. 

Can You Appeal a Penalty Charge for Not Having a Commercial Energy Performance Certificate?

You do have the option to appeal if you believe you have been treated unfairly. All charges include instructions on how to appeal. You can ask for a review of the penalty charge notice. If the review indicates that you should still be charged, you can then appeal to county court or the sheriff court if you reside in Scotland. This must be done within 28 days of receiving your confirmed penalty.

Is an EPC Required for a Commercial Lease Renewal?

Yes. Landlords are required to obtain a new EPC if they intend to re-let a commercial property (to the current tenant or to a new tenant) once the current lease expires or if they (or their tenant) modify the property in a manner that would require a new EPC.

Can You Sell a Commercial Property Without an EPC?

No. If you’re selling, renting or building commercial property, you need a Commercial EPC rating of E or higher. 

How Can You Improve a Commercial EPC Rating?

Your business can take steps to improve its Commercial EPC rating. These may include installing LED Lighting, upgrading heating and cooling systems, better insulating the building, utilising more renewable energy sources, improving ventilation, or even investing in a building analytics solution to better monitor your premises’ performances.  

Commercial EPCs are critical to all businesses, and improving yours will not only improve the value of your property but can even help to bring down your overheads and improve your business’s green credentials. Here at Switchpal, we understand this, and we can help you. By switching your energy to renewable sources and modernising your business, you can add a better EPC to the list of other benefits you get from making these changes. Get in touch and find out how you can benefit from this shift in business priority!