Konect 62, Knottingley

Due Diligence and EPC Review for Unit K161, a 160,000 sq.ft industrial unit

Our client was taking on a long lease of a brand new 160,000 sq.ft industrial unit. The terms of the lease included a green clause which forbade the EPC rating being negatively impacted by any tenant fit out works. As part of the tenant’s due diligence SEA were engaged to conduct an EPC Review of the existing new build EPC.

The EPC review comprised a two-stage process:

Stage 1 – Review and Confirm the Landlords EPC was correct.

Stage 2 – Assess the impact of the proposed tenant works to the property.

Reviewing the landlords EPC is a critical stage. For this property the landlord had an A rated EPC.

Although the landlord had forwarded a comprehensive O&M manual to the tenant, none of the technical documents needed to replicate the A rating had been provided. Without them only basic default performance specifications are allowed to be used.

Based on what had been provided, we could only achieve a B rating for the building. This would have meant the Tenant was starting at a significant disadvantage when analysing their alterations works.

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After requesting and reviewing the additional technical documents needed, it was discovered that the Landlords EPC rating did not hold up to scrutiny. The inputs used by the landlords EPC assessor did not match what had been installed in the property.

The A rating EPC being referenced in the lease was an over estimate of the building’s actual performance. In order to “maintain” the “A” rating, the tenant would have needed to spend £100,000s to improve the buildings EPC performace.

After discussing our findings with the tenant and the landlord, the two parties were able to agree terms and the lease was signed.

An added bonus was that the tenant works being proposed would improve the EPC rating and the landlord would now have a verifiable A rated building.

For the tenant this highlighted the value of carrying out due diligence, with EPCs now being referenced in the terms of leases. It shows that the EPC ratings should not always taken at face value.

For the landlord this highlighted a weakness in the new build EPC field that they were unaware of.

Our in-depth experience and technical knowledge of EPCs, MEP design and Building Control meant we could resolve the situation amicably for all parties and to everyone’s advantage.