Landlords and SMEs
This information should not be taken as legal or technical advice and therefore no liability is accepted by its authors. Where appropriate, please seek advice from your professional advisers.
Energy Act 2011
Following the introduction of the Energy Act 2011 and its associated regulations, the energy efficiency of many commercial and residential properties needed to be improved to comply with the regulations. After 1st April 2018, it has been unlawful to grant a new tenancy (or to renew a tenancy) for a residential or commercial property with an energy rating of F or G, unless certain exemptions apply. From 1st April 2020, the regulations extended to all residential tenancies (with a few exceptions) and from 1st April 2023 the regulations applied to all commercial tenancies (with a few exceptions). Since 1st April 2016, residential tenants have had the right to request permission from their landlord to enable them to carry out energy-efficient improvements to their homes.
Energy Performance Certificates (EPCs) are already required by law whenever a domestic or commercial property is built, sold or rented (regulation 6, Energy Performance of Buildings (England and Wales) Regulations 2012).
An EPC provides information on how energy-efficient a building is, giving it a rating from A (very efficient) to G (inefficient). It also provides information on the likely carbon dioxide emissions from a building and what that building's energy efficiency rating could be if suggested improvements were made.
Where a building or a self-contained part of a building is being sold or let, the seller or landlord must ensure that an EPC has been commissioned before marketing the property and make available a copy of the EPC to any prospective buyer or tenant.
Certain buildings and transactions are exempt from the EPC requirement.
Tenant's Energy Efficiency Improvements
In early 2016, the Government issued guidance for landlords and tenants of domestic property on Part Two of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015: ‘The tenants’ energy efficiency improvements provisions mean that, subject to certain requirements and exemptions, from 1 April 2016, where a tenant requests their landlord’s consent to making energy efficiency improvements to the landlord’s property, the landlord may not unreasonably refuse consent.’
The Government scrapped the funding for the Green Deal Home Improvement Fund in 2015. This has removed one source of funding for tenants to fund energy efficient improvements but funding may still be available for the landlord through the Green Homes Grant scheme.
Published guidance can become outdated due to the evolving nature of this subject. The Energy Saving Trust provides guidance.
Minimum Energy Performance Rating of Rented Homes
From 1st April 2018, with a few exceptions, all private rented homes needed to have a minimum energy performance rating of E when they were let or when an existing tenancy was renewed. The energy performance rating is shown on the property’s Energy Performance Certificate (EPC). The regulations applied to all existing residential tenancies on 1st April 2020. A civil penalty can be imposed for breaches of the regulations. Unless an exemption applies, it is unlawful to let a property with an energy performance rating of F or G.
In the Energy White Paper, the government proposes a minimum EPC C rating for new tenancies from 2025 with this rating being required for all tenancies from 2028.
Published guidance can become outdated due to the evolving nature of this subject. The Energy Saving Trust provides guidance.
Minimum Energy Performance Rating of commercial properties let to businesses
From 1st April 2018, with a few exceptions, all rented non-domestic properties needed to have a minimum energy performance rating of E when they were let or when an existing tenancy was renewed. The energy performance rating is shown on the property’s Energy Performance Certificate (EPC). On 1st April 2023, the regulations were extended to apply to all existing commercial tenancies (with some exemptions). There are significant penalties for breaching the regulations. These are set out in Chapter 6 of The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.
In the Energy White Paper, the government has showed its intention to set a requirement for an EPC B rating by 2030 for rented commercial property in England and Wales, and it is consulting on a requirement for an EPC C rating by 2027.
SME Guide to Energy Efficiency
Saving energy (and therefore saving money) does not necessarily require any capital investment as savings can be made by behavioural changes such as adjusting thermostats on the heating system and turning off lights and equipment when they are not needed. Walking around the business premises at various times of the day can identify areas where savings can be made. By focusing on the following areas, it should be possible to produce effective savings.
Heating (and cooling)
Lighting
Equipment
Building Fabric
Staff support – behavioural changes if necessary
Energy generation
Where capital investment is beneficial, the government offer some encouragement through schemes like the Enhanced Capital Allowance (ECA) scheme. However, enhanced allowances for energy and water efficient plant and machinery were ended in April 2020.
Further encouragement was offered through Non-domestic Renewable Heat Incentives. However, according to OFGEM, the Non-Domestic Renewable Heat Incentive Scheme (NDRHI) in Great Britain closed to new applicants on 31 March 2021. There are some circumstances under which an application for accreditation or registration can be made post-scheme closure, including those that have been granted an extension application or have a Tariff Guarantee extended commissioning date. Information on environmental and social schemes can be found on the OFGEM website.
The Government has also produced the useful SME guide to energy efficiency.
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