There are less than six months until the next phase of the Minimum Energy Efficiency Standard (MEES) regulations come into force.
It is currently unlawful for a landlord to grant a new lease of a commercial property with an EPC rating of F or G, unless an exemption applies, or the property is excluded from MEES altogether.
From 1 April 2023, it will be unlawful for a landlord to continue to let a commercial property with an EPC rating of F or G, even if the lease was granted many years ago.
The current exemptions (see below) will still apply, and this new regulation will not catch certain properties which are excluded from MEES.
Landlords in breach of the MEES regulations will be subject to a financial penalty based on the rateable value of the property with a cap at £150,000 per breach. Details of the breach may also be published on a public register.
There are a number of exemptions which a landlord might look to rely on. Detailed rules apply but the most common exemptions for commercial properties are:
- The Consent Exemption, where the tenant has refused consent to the suggested energy improvement works. This exemption can only be relied upon if the landlord needs consent from the tenant to carry out the works. This depends on what the lease says (or doesn’t) about landlord's access rights.
- The Payback Exemption, where the cost of the energy improvement works is not recouped by energy savings over a 7-year period.
- The Devaluation Exemption, where the landlord has a report from an independent surveyor which confirms that the energy improvements would devalue the property by more than 5% of market value.
- The Temporary Exemption, where a new landlord is given six months to assess the necessary improvements or to register another exemption.
It is also a legitimate reason to continue to let a sub-standard property where all relevant energy improvements have been made and the property remains sub-standard.
In a 2020 White Paper, the Government proposed to raise the minimum EPC standard for commercial properties to C by April 2027 and then to B by April 2030. Legislation has not yet been brought forward, but we still expect this to be implemented.
Estates Gazette reports that in the next eight years, 88% of commercial properties in the UK will need energy performance improvements to meet the Government's proposed criteria.
Read our client guide, which sets out the rules for commercial properties in more detail.