EPCs and commercial lease renewals

The EPC (Energy Performance of Buildings (England and Wales) Regulations 2012) Regulations and MEES (Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015/962)) Regulations both seek to address issues relating to energy performance. However, the implementation of both sets of regulations often leads to confusion and this is particularly apparent with the issue of EPCs on lease renewals.

Do you need a valid EPC on the grant of a renewal lease?

EPC Regulations

The EPC Regulations set out the obligation to provide an EPC when “selling” or “renting out” a property. However, neither of these terms are defined in the EPC Regulations.

The Department for Communities and Local Government subsequently set out a guidance note in 2017, specifying that certain transactions would not fall within the scope of a sale/letting. Lease renewals are listed as being outside of the scope.

So there is guidance (not law) setting out that an EPC is not required for a lease renewal under EPC Regulations.

MEES Regulations

The MEES Regulations however go in the opposite direction to the EPC Regulations.

The MEES Regulations prohibit the letting of sub-standard non-domestic private rented property as a result of an extension or renewal of an existing tenancy on or after 1 April 2018.

So how do you know whether the property is sub-standard without having an EPC to confirm?

The non-domestic MEES guidance note suggests that in the absence of a valid EPC, a new EPC would be required on a re-letting to a current tenant.

So the EPC Regulations, read in conjunction with the guidance note, set out that an EPC is not required for a lease renewal but the more recent MEES Regulations, read in conjunction with the guidance note, set out that a valid EPC is required. This is a common bone of contention between landlords and tenants on otherwise often straightforward lease renewals. Given that from 1 April 2023 all commercial properties will require an EPC it makes sense to be getting the EPC on any renewal. The safest approach would therefore be to stick with the most recent regulations and obtain an EPC.