Commercial Property - The Road to Net Zero?

Richard Clithero
Richard Clithero

Published: March 1st, 2022

7 min read

In our previous edition we wrote about "green" leases and how the parties to a lease may seek to agree terms in a lease or side agreement that focus on improving the environmental position of a building. The parties (particularly a landlord) may simply be motivated by a desire to meet regulations with regard to minimum energy efficiency standards (MEES), to achieve an Energy Performance Certificate (EPC) rating for the building that at least meets the government's minimum requirements. However, with ever increasing focus on the energy efficiency of buildings it is fair to ask - is aiming to meet the minimum standards enough?

EPCs have been an essential part of buying, selling and renting properties for many years now, with the introduction of MEES several years ago showing the intention of government to focus on the energy efficiency of buildings. As it stands today the minimum required EPC rating for a property is E (unless an exemption applies), but with proposals for a minimum EPC rating of C by 2027 and then B by 2030 for commercial properties, the direction of travel on this issue is clear. Owners and occupiers of buildings would be well advised to consider the energy efficiency of the buildings that they own or operate from, beyond simply meeting the minimum requirements to comply with the regulations but looking towards an eventual goal of net zero buildings (where possible).

From a legal perspective it is interesting to note the development of drafting legal documents containing clauses focussing on energy efficiency does not just include "green clauses" in property documents such as leases. Such clauses are also developing in documents such as financing and funding agreements; terms and conditions for the supply of goods and services and insurance terms. This shows that the issue of the energy efficiency of buildings that businesses operate from (or own) may not only be of interest to the government in terms of compliance with minimum energy efficiency regulations, but also to bodies such as funders (who may consider energy efficiency as part of their decision as to whether or not to offer funding, or on what terms) or clients and customers (who may require their suppliers to meet certain energy efficiency requirements in order to do business with them).

The case for genuinely sustainable buildings therefore grows ever stronger.

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