ESOS for Landlords and Tenants: Who Is Responsible for What?

ESOS is written around organisations rather than buildings, which works cleanly for an owner-occupier and much less cleanly for a multi-let office or retail scheme. A landlord may qualify on the basis of group turnover while consuming relatively little energy directly. A tenant may consume a great deal while holding no meters in its own name. Both may be in scope, and both may be looking at the same kilowatt hours.

The organising principle is responsibility for the energy. Energy an organisation consumes and pays for — whether directly metered or recharged through a service charge — generally falls within its ESOS boundary. Energy it merely supplies to a third party who reimburses the cost is more properly the consumer's.

A qualifying landlord's ESOS scope typically covers landlord-controlled areas and plant: common parts lighting, lifts, central heating and cooling plant, car parks, and any energy purchased centrally for the building. Where the landlord procures energy and recharges it at cost through the service charge, treatment depends on who exercises control over consumption, and this should be documented in the audit file rather than assumed.

In practice landlords are also the party best placed to act on the recommendations, because they control the plant. That makes ESOS a useful mechanism for building the case for central plant upgrades that improve EPC ratings and support MEES compliance at the same time — two obligations addressed by one capital programme.

A qualifying tenant's scope covers the energy it consumes within its demise, plus its transport and any process energy. The frequent difficulty is data: where a unit is not separately metered and energy arrives as a service charge apportionment based on floor area, the tenant has a cost figure but no consumption profile.

The practical fix is to request consumption data rather than cost from the landlord or managing agent, and to press for sub-metering at the next fit-out or lease event. Without a consumption profile, a tenant's audit can identify little beyond generic recommendations, which wastes the exercise.

Older leases are often silent on energy data, which leaves both parties relying on goodwill. Green lease clauses — data sharing obligations, cooperation on efficiency works, and provisions allowing the recovery of energy improvement costs through the service charge — remove most of the friction and are now common in new institutional leases.

Dilapidations and reinstatement provisions matter too. A tenant required to strip out efficient plant and reinstate to a less efficient base specification is being obliged to destroy value, which is why sustainable dilapidations advice increasingly forms part of lease exit strategy.

Where landlord and tenant both qualify, the sensible approach is to coordinate site visits and share data. A single survey visit that serves both parties' audits is cheaper for everyone and produces better recommendations, because the assessor sees the whole building rather than half of it.

This is straightforward at single-tenant buildings and harder at large multi-let schemes, but even a partial data-sharing arrangement with the largest tenants materially improves the quality of a landlord's assessment and vice versa.

Landlords should map, for each building, which supplies are landlord-procured, which are directly metered to tenants, and where sub-metering gaps exist. Tenants should identify which of their demises lack consumption data and raise it with managing agents well before the compliance date.

Oak Tree Rule advises both landlords and occupiers on ESOS, commercial EPCs and multi-let building strategy. If your boundary position is unclear, we can review it.