Can commercial property leases restrict tenant alterations to protect EPC ratings?
When commercial property leases are renewed under the Landlord and Tenant Act 1954, it can be difficult for the landlord or tenant to force any changes in their favour beyond simply updating through modernisation.
A recent case, however, has considered whether a landlord can impose upon the tenant provisions more commonly now seen in ‘green leases’ which are designed to promote energy efficiency for commercial properties.
The landlord in question wished to update the commercial property lease to specifically prohibit the tenant from carrying out any alterations that would bring the EPC rating below the Minimum Energy Efficiency Standards (MEES), together with other green lease provisions.
The landlord argued that the green lease provisions were reasonable when considering the likely legislative changes to come into force during the term of the new lease, namely the current Government proposal of all commercial properties having a rating of no worse than B by 2030. You can read more about this proposal in a previous article.
Although the Court agreed that the landlord was at risk of the EPC rating dropping below MEES in the future, it was only prepared to permit a provision within the commercial property lease that required the tenant to return the premises to the landlord with the same EPC rating as it had at the start of the lease.
Although a lower court decision, landlords need to be aware that the 1954 Act lease renewal process is unlikely to be a means to impose green lease provisions on their tenants. The parties will need to try and agree provisions of this nature as part of their commercial property lease renewal negotiations.
Notwithstanding the above, if the Government sticks to its proposals, it is possible that what the courts consider to be “fair and reasonable” in terms of green provisions could well change as they become more common in modern commercial property leases. Of course, nothing is guaranteed so we will keep a watch on how this pans out.
If you are a landlord who is concerned about minimum energy efficiency standards or would like advice on commercial property leases, then please get in touch with GA’s experienced commercial property solicitors in Plymouth.
Call us today on 01752 203500. You can also email me directly via david.stone@GAsolicitors.com.
GA Solicitors’ commercial property team is ranked in The Legal 500 and is one of the largest dedicated commercial teams in Plymouth. GA Solicitors also has a specialist renewable energy team based in its Bath office, known as GA Energy.
If you are interested in commercial property then you can read an additional article about the review of the Landlord and Tenant Act 1954 here, and also a guide to commercial property investment here.
If you are looking for solicitors in Plymouth then GA Solicitors is here to help.