Energy Efficiency Standards

What are the Minimum Energy Efficiency Standards?

The Minimum Energy Efficiency Standards (MEES) are a set of regulations that were introduced to try and improve the energy efficiency of residential and commercial rented properties. They became law in England and Wales on 1 April 2018.

How is a property’s energy efficiency assessed?

A property’s energy efficiency is determined by an EPC (Energy Performance Certificate). An EPC is a certificate issued by a qualified assessor that confirms the energy efficiency rating of a property. Properties can be given a rating between A-G, with A being the highest and G the lowest.

An EPC will also include recommendations on how the energy performance of the property could be improved.

How does MEES currently apply to commercial properties?

Since April 2018- subject to certain exemptions- it has been a legal requirement under the MEES regulations that a commercial property must have an EPC rating of at least E before a new or renewal lease can be granted.  Failure to comply risks a fine of between £5,000 to £150,000 for the landlord, and also the risk of the breach being publicised on the PRS Exemptions Register.

What is changing?

With effect from April 2023 the minimum rating rule will be extended to apply to both new and existing leases. Landlords who continue to let a non-exempt commercial property with a rating of less than E will be in breach of the regulations.

What should commercial property owners do to plan for this change?

Consider beginning the following steps now:

1. Check EPC ratings: carry out an audit of current EPC ratings, and their dates of expiry. Certificates are generally valid for 10 years unless there’s been a substantial change to the building or it’s been replaced by a new certificate.
2. Find out if the regulations apply to the building or lease. Whilst most commercial properties and lettings are affected, some are exempt e.g. listed buildings (provided that it can be established that the energy improvements would unacceptably alter their character or appearance) or properties that are let for less than 6 months or more than 99 years.
3. If there are concerns that a property has a low rating, consider if one of the exemptions from carrying out improvements applies. Broadly, these include:

• all possible energy efficiency improvements have already been carried out, or there are none that can be made;
• the landlord cannot get the consent needed from its tenant or another relevant party to carry out the improvements;
• the improvements would devalue the market value of the property.

The exact requirements of the exemption being relied on would need to be met and in each case the exemption must be registered on the PRS Exemptions Register.

4. If it is likely that the EPC rating will need to be raised in readiness for April 2023, take professional advice from a surveyor or building consultant in good time and make an action plan for energy improvements, such as implementing green lease provisions.
5. If possible, plan for the longer term. The Government has made clear that they are keen to introduce ambitious energy efficiency targets. The 2020 Energy white paper indicated that all commercial properties would be required to achieve an EPC rating of at least B by 2030. A consultation issued last year set out a proposed framework for meeting that, suggesting that an interim target of C rating by 2027 may be required.

What else might I need to know about EPCs?

An EPC is legally required when a property is sold, let or newly constructed. An EPC can be required in other circumstances, but these are the main ones.

If a property owner is using a property agent to sell or let their property, they will usually ensure that an EPC is in place before the property is marketed or advertised. However, it’s important to be aware that even if an agent is not used (i.e. it’s a ‘private’ deal) EPCs are still a legal requirement- they must be produced to any prospective buyer or tenant.

The minimum rating rule set out in the MEES regulations applies to lettings only- not to sales. However a low rating is likely to concern buyers if they may want to rent out the property in the future.

If you need any advice on Energy Efficient Standards, please contact a member of our commercial property law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.