Survival of the Greenest: Meet the EPC ‘B’ Deadline

The Energy Performance Certificate

The United Kingdom (UK) government is targeting net zero carbon as part of their responsibility to combat climate change. The commitment is real – with the minimum energy efficiency standard (MEES) regulations that took effect on the 1st April 2023, it will be illegal to let or sell a property with an energy performance certificate (EPC) rating of ‘F’ or ‘G’ in England and Wales (unless a valid exemption is applied and registered). The government is currently seeking public consultation on the proposed regulatory changes for MEES for commercial buildings that will require a mandatory EPC rating of ‘B’ by the year 2030 to let or sell a property. According to data provided by the Government of the United Kingdom (2023)1, these changes are projected to impact approximately 1,000,000 or 80% of commercial buildings across England and Wales that currently have an EPC rating of ‘C’ to ‘E’. The magnitude of this proposed transition is substantial.

What does this mean to UK landlords and real estate investors?

Every 1,000,000 of these buildings, from the castles of Hogwarts to famous addresses like Sherlock Holmes’ Baker Street will need to get their ‘green’ on and flex their new solar panels. Essentially, we are looking at a monumental transformation of 80% of the existing building stock.

Feeling the pressure?

With just 6 years and 5 months to go, the race is on, and landlords should act now and consider energy improvements to their assets. Landlords must integrate these energy renovations into financial planning. Energy efficiency upgrades must be included in capital expenditure (capex) cycles and must be a set item on budget plans for routine maintenance or upgrades.

It is crucial to time these upgrades around tenants’ lease periods to avoid any disruption to the occupier. When re-negotiating lease terms, a discussion on energy efficiency upgrades can be an opportunity to share the cost of upgrades and their benefits, depending on the leasing arrangement. Early planning will facilitate a smooth transition to meet the upcoming minimum energy efficiency standards and ultimately will be cost saving as upgrades can be planned to integrate with existing maintenance and renovations.

Uncovering the Essence of an EPC

• Energy efficiency insights – EPCs can help you understand how well your building uses energy and where improvements can be made. The energy efficient operation of a building results in cost savings on utility bills, which can attract potential tenants and provide better financial outcomes for landlords, prolonging the building’s lifespan and increasing the property value.
• Carbon dioxide emissions (CO2) – EPCs can help you highlight your building’s environmental impact, which is important for transparent reporting and carbon footprint disclosure.
• Compliance and regulations – EPCs are mandatory when selling or renting buildings. Landlords who neglect to comply with regulations face financial penalties, loss of rental income, and potential public exposure through a non-compliance register.

Unpacking the Debate on the Validity and Reliability of EPC Models

EPC models, their validity and reliability, have been a subject of academic discussion since their inception. EPCs provide a transparent framework, standardized across a nation, for assessing and communicating the energy performance of buildings. However, it should be noted that EPC models are not standardized across Europe, which has historically posed challenges when comparing the energy efficiency of assets with the same letter score across different nations.

Critics have argued that buildings with poor EPC ratings can easily improve their ratings by implementing minimal and ‘low-hanging fruit’ improvement, but landlords are not incentivized to continue making improvements. This raises questions on the effectiveness of MEES regulations and whether they are ambitious enough for the performance of the existing building stock.
EPC recommendation reports have also been critiqued. Critics argued that the recommendations and costs are often overly general and do not account for the specific needs and circumstances of the building and its envelope.

Despite these criticisms, it is important to recognize the value that the EPCs bring to the table. The ratings allow potential buyers or tenants to understand the energy efficiency of a building in simple terms, to compare performances, and to make informed decisions. The EPC framework in the UK and Europe has created a language to discuss energy efficiency and the value in that should not be overlooked.

How can Partner Property Consultants help you?

At Partner, we have a team of in-house EPC assessors. We certify buildings with EPC certificates, and we augment the standard EPC process by offering tailored energy efficiency consultations. Our assessments provide detailed recommendations with costings and paybacks to take the subject building’s current EPC performance to a level ‘B’ to meet 2030 MEES requirements, while considering the owner’s unique circumstances, goals, and constraints. With our extensive experience in environmental reporting, technical due diligence, construction risk consulting, property condition assessments, ESG assessments, and EPC certification, MEES review and EPC strategic improvement report, we do not consider energy efficiency in isolation. We offer more than just assessment, but business-friendly solutions to meet performance objectives.

1. Government of the United Kingdom, 2023. EPCs for non-domestic properties (Excel Spreadsheet). [online] GOV.UK. Available at: https://www.gov.uk/government/statistical-data-sets/live-tables-on-energy-performance-of-buildings-certificates#epcs-for-non-domestic-properties (Accessed: 25 May 2023).