EPC – As Easy As 1, 2, 3? Not Quite

The government has recently set out plans to implement its non-domestic MEES targets. From 2031, all private rental buildings over 1,000 sq m in England & Wales will need to reach a higher energy-efficiency standard of EPC B where cost-effective.

Although these targets are still 4/5 years away, we are seeing landlords look to achieve them now where possible, particularly where properties are becoming vacant. Such is becoming common on older industrial units where landlords are:

• Replacing energy-inefficient roofs
• Installing solar panels on these new (upgraded to become suitably able) roofs
• Replacing heating/cooling systems with electric only (VRF) and capping gas
• Upgrading lighting
• Installing wider and taller level access doors, and replacing older dock-levellers with new ones to achieve both faster and warranties

As a result, these works are affecting terminal dilapidations discussions and settlements. We were recently instructed to deal with a dilapidations claim on a 35,000 sq ft industrial unit. From our review of the local market, it was clear that the landlord would undertake a number of modernisation works to achieve an EPC rating of “A” and, as a result, supersede a number of the dilapidations works sought in the claim. This enabled us to achieve settlement at a substantial reduction in the claim by (combining both a robust common law response by one of our Building Surveyors and) applying Section 18 (Diminution in Value) by one of our Valuers’ knowledge & understanding of how modern open market requirements of investors and new tenants alike serve to snuff out (supersede) many of the claimed “big-ticket” items.

As usual, each case is on its own merits, but we expect to see more of these cases for large industrial units if the government’s EPC targets remain.

Facing a dilapidations claim on an industrial or warehouse property?

If your landlord plans to refurbish, modernise, or improve the property's energy efficiency after you leave, those works could significantly affect your dilapidations liability.

At Dilapsolutions, our Building Surveyors and Valuation Surveyors work together to examine both the works being claimed and their actual impact on the property's value. This includes considering whether planned EPC improvements or other modernisation works could supersede elements of the landlord’s claim.

If you are approaching lease end or have already received a Schedule of Dilapidations, speak to our team for an initial discussion about your position.

Contact neil@dilapsolutions.com at Dilapsolutions for practical advice on your dilapidations claim.