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Minimum energy efficiency standards to commercial property in England and Wales

Posted on 20 April 2023

What is MEES?

The Minimum Energy Efficiency Standard (MEES) rules require landlords to upgrade energy inefficient properties before renting them out. Since 1 April 2018, it has been unlawful to rent out premises with a low energy rating. From 1 April 2023, even existing leases will become unlawful if the premises have a low rating.

A property is caught by MEES if its EPC (energy performance certificate) has a rating of “F” or “G”.

What changed on 1 April 2023?

It will be/became 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 years ago. This means that a lease that was legal when granted will become unlawful from 1 April 2023 (unless one of the exemptions apply).

Enforcement and penalties

If in breach, the landlord will be liable to pay a civil penalty of up to 20% of the rateable value of the property, which is capped at £150,000.

The landlord’s details will also be put on a public “name and shame” register, which will have a negative impact on reputation.

From a landlord's perspective, it is important to note that no penalties will be payable by the tenant. The lease will remain valid and the tenant will still be liable to pay the rent and observe the lease covenants.

MEES will be enforced by local authorities, but it is not yet clear if they will be allowed to keep the cash raised from penalties. If they are, then cash-strapped local authorities may be more rigorous in clamping down on breaches.

To date, there seems to have been very little enforcement of the MEES rules in practice.

Full exemptions

If a property is caught by MEES, then the landlord may still let it (even with a grade F or G rating) if one of the following exemptions apply:

  1. The landlord has carried out the recommended energy improvement works, but the property still has an F or G rating.
  2. The recommended energy improvements do not pay for themselves in energy savings over a seven-year period. The regulations prescribe a detailed formula for this purpose.
  3. The landlord has failed to obtain third party consent which is needed for the works, despite using reasonable efforts to do so, or consent has been given subject to a condition with which the landlord cannot reasonably comply. This would include the consent of a tenant, a superior landlord, a mortgagee, or the local planning authority.
  4. The landlord has obtained a report by an independent surveyor, which says that making the energy improvements:
    1. would reduce the property’s value by more than 5%; or
    2. would have a negative impact on the fabric or structure of the property.

The landlord must register its exemption on a central online register.

A registered exemption lasts for five years and is personal to the landlord. Therefore, if the landlord sells the property, the new owner must apply for a fresh exemption.

The Government’s MEES guidance states that the exemption for lack of tenant consent only remains valid so long as that tenant remains the tenant. Therefore, if the tenant assigns the lease, the landlord will have to seek fresh consent from the new tenant. This is not, however, reflected in the MEES regulations, and the guidance note is not legally binding.

Temporary exemptions (valid for six months)

There are also some temporary exemptions, designed to give landlords a six-month breathing space where they have recently taken on a lease. These include:

The landlord has bought a property which is subject to an existing lease.

The lease has been renewed pursuant to the Landlord and Tenant Act 1954.

The lease has been granted pursuant to a contractual obligation. We consider that this was intended to cover contractual obligations in agreements for lease entered into before April 2018, but the legislation is not drafted this way and would cover any agreement for lease.

These temporary exemptions must also be registered on the central register. When the six months have expired, the landlord must either carry out the necessary energy improvements, or register a “full” exemption.

The future of MEES

The Government has 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 it is still expected to be implemented. As such landlords need to bear in mind that the MEES standards are increasing and take this into account in their plans for the property.

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