If you’re a commercial landlord, it’s important to understand what’s what when it comes to the electricity and gas supply of your properties. Here’s all you need to know.
Before a tenancy
What are my responsibilities as a commercial landlord?
As a commercial landlord, it is your responsibility to ensure each property you own is always supplied with electricity, gas and hot water through safe, working appliances.
This means if you provide any gas or electrical appliances as part of the lease, it is up to you to ensure they are in good, safe working order, unless otherwise stated in the lease.
Note, however, that once a tenant moves in, they will be responsible for any electrical appliances they buy or install.
What alarms do I need?
By law, commercial properties are required to have adequate safety mechanisms in place to detect and alert tenants in the event of a fire. Depending on the type of property, smoke alarms must be fitted in every room or on every storey of the property.
What electrical checks are required?
You will need to have your property surveyed before letting it out. An Electrical Installation Condition Report (EICR) should be compiled by a registered electrician, and the property should be inspected by a registered electrician at least once every five years.
What gas safety checks are required?
All commercial gas installations should be serviced regularly and maintained in a safe condition. By law, a commercial safety check must be carried out on gas appliances and flues once a year or before the start of each new tenancy.
Checks must be carried out by a Gas Safety registered engineer – you can find one by entering the property’s post code into the Gas Safe register. You will also need to keep a record of each commercial gas safety check for two years.
If a problem is found by the engineer, it is your responsibility to get it fixed (again, you will need to use a Gas Safety registered engineer to complete the work).
You must provide a copy of the Gas Safe installer’s safety check report to each individual new tenant before they move in and within 28 days of every subsequent annual inspection.
Failure to comply with gas safety laws means your tenants could report you to the Health and Safety Executive (HSE) and you could be fined or even face prosecution.
What do I need to know about Energy Performance Certificates?
The majority of commercial properties must have a valid Energy Performance Certificate (EPC). This shows how energy-efficient a property is on a rating system of A to G, with A being the most efficient and G being the least.
You will need to display the EPC by fixing it to your commercial building if all of the following apply:
- the total useful floor area is over 500 square metres
- the building is frequently visited by the public
- an EPC has already been produced for the building’s sale, rental or construction.
The cost of the EPC will depend on the building being assessed and it will be valid for up to 10 years. If you don’t make an EPC available to any prospective tenant, you can be fined between £500 and £5,000 based on the rateable value of the building.
What EPC rating will I need?
As of April 2018, if you want to lease a commercial property to a new tenant or renew a lease with an existing tenant, the property must have an EPC rating of ‘E’ or above. If your property has a rating of ‘F’ or ‘G’, you will need to take steps to improve its energy efficiency.
From April 2023, this will apply to every lease, including those already in place. What’s more, as part of the government’s promise to achieve an 80% reduction in CO2 emissions by 2050, it’s likely rental properties will need to have a ‘D’ rating or above by 2025, and a ‘C’ rating or above by 2030.
When won’t I need an EPC?
You won’t need an EPC for a building if you can demonstrate it is any of the following:
- listed or officially protected and the minimum energy performance requirements would unacceptably change it
- a temporary building that will only be used for two years
- used as a place of worship or for other religious activities
- an industrial site, workshop, or non-residential agricultural building that doesn’t use much energy
- a detached building with a total floor space of less than 50 square meters
- due to be demolished, providing all the relevant planning and conservation consents are in place.
A building is also exempt if:
- it’s due to be sold or rented out with vacant possession, and;
- it is suitable for demolition and the site could be redeveloped, and;
- the buyer or tenant has applied for planning permission to demolish it.
During a tenancy
Who is responsible for paying the energy bills?
Unless otherwise stated in the lease, the tenant is usually responsible for paying gas and electricity bills. However, as soon as a tenant moves out, you will take on the responsibility until a new tenant moves in.
If you prefer, you can choose to include energy bills in the lease and charge the tenant for the gas and electricity they use (known as re-charging). If you have multiple units and tenants in one building, you may charge your tenants based on the floor space they occupy.
Can tenants decide which energy supplier to use?
If your tenants are paying the energy bills, they are entitled to choose their supplier. In fact, switching energy supplier could potentially save your tenants hundreds of pounds each year.
The gas and electricity will still be supplied through the same pipes and cables so there will be no digging or drilling at the property and there should be no disruption to the energy supply.
If, however, you have included energy in the lease, it’s up to you to switch supplier if you wish to. If your tenants wish to switch, they will need to talk to you first.
What about energy meters?
If your tenants are responsible for paying the bills, they can choose to get a new business energy meter fitted.
Energy meters measure the amount of energy the business uses, and some will also send readings back to the supplier. This can help ensure bills are accurate and not based on estimates, so your tenants will only be paying for the energy they are using.
If, however, you are re-charging your tenants and have multiple tenants in one building, you may want to consider a sub-meter system. This can be installed to monitor each tenant’s individual electricity consumption.
A sub-meter system can be installed in multi-occupancy buildings and multi-let offices and ensures individual tenants only pay for the electricity they use, rather than paying costs split from the main meter.
It can also help you gain a better idea of the building’s overall energy consumption and potentially help you to implement more effective energy-efficiency measures.
After a tenancy
What happens when a tenant moves out?
Once a tenant has moved out, it will become your responsibility to pay the energy bills. It’s worth going round the premises to make sure everything is switched off to reduce any energy wastage.
It is also a good idea to take a meter reading at the end and start of each tenancy, so that you have a record in case the supplier requests them at any point.
What if my tenants haven’t paid their energy bills?
If your tenants were responsible for paying their own energy bills, you as the landlord and property owner should not be liable if your tenants have moved out without paying the bills.
Instead, you should contact the supplier, explain what has happened, and provide up-to-date meter readings. If you have a forwarding address, pass that on too.
If, however, the energy bills were registered in your name and you were re-charging your tenants, you may be responsible for any unpaid bills.
