31 July, 2023
The challenges that sustainability brings to the manufacturing sector are well known. Whether that be manufacturing a product that is more energy efficient or simply reducing the carbon footprint of the whole manufacturing process. Part of that discussion moving forward must also include the commercial premises from which manufacturers operate. The issue of sustainability will be particularly pertinent to those manufacturers that rent their commercial premises.
Whilst much of the changes around sustainability centre on market forces we must also consider the effect of what is being legislated for. From the 1st April 2023 commercial landlords can no longer grant a new lease if the EPC rating of a property is below an E. This applies to all continuing / existing leases as well as new ones unless you have registered a valid exemption. It likely won't end here though if the government continues with their current plans for the minimum EPC ratings to rise to a C in 2027 and a B in 2030. These changes will affect a significant proportion of all commercial properties.
As a tenant you will need to be particularly conscious of the changes coming. From your perspective surely a more energy efficient premises is good for the business, especially if it is the landlord that will need to finance the work (lease depending). Well, it might be but there also might be unforeseen consequences. Inevitably more energy efficient properties will come with higher rental costs although that should be offset to some degree by the energy savings brought on by the changes. Are there any rent review provisions or break clauses that the landlord can utilise to obtain a higher rent. Have you factored any potential increase into your future finances?
Similarly, if works are to take place, what reserved rights does the Landlord have to access the premises and carry out any works that need to be done. If energy efficiency works are required to the premises will that work interfere with your manufacturing process? If it does, is there anything you can do to stop it or minimise the disruption to your processes. Should the Landlord consult you about what those works will look like? These are questions that you need to consider if you haven't already.
Even if you own your premises outright - one eye will inevitably be on any future sale or rental of the premises when your business needs no longer require it. The question of what the EPC rating is or any other such environmental labelling system like BREEAM will become increasingly important. If you are looking to increase the sustainability of the premises, you own then you must remember that there is so much more to consider than just what work you want to carry out. Are there any title issues that could prevent you from carrying out the work or potentially cause issues somewhere down the line? What about planning permission and / or building regulation approval?
If any of the above questions apply to you then you should speak to a commercial property specialist about your existing leases and / or the work that you are planning to do.
For more information contact Richard Clithero in our Manufacturing & Engineering department via email or phone on 0333 207 1159. Alternatively send any question through to Forbes Solicitors via our online Contact Form.
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