As of 1st April 2023, significant changes have been made to the Minimum Energy Efficiency Standards (MEES) regulations, particularly relating to commercial properties. A key modification is that an EPC rating of at least “E” is mandatory not only for the granting, renewal or extension of leases for “substandard” commercial properties but also for the continuation of any existing lease or tenancy agreement.
“Substandard” commercial properties are defined as properties with an EPC rating of below “E”. As a result, the above changes mean that existing leases falling under this category will not automatically terminate but instead, will continue to be occupied unlawfully. This new provision ensures that properties already occupied by tenants are also subject to these new requirements.
Landlords who fail to meet these regulations will face severe consequences including fines of up to £150,000 as well as reputational damages. Instances of non-compliance and violations of the regulations will likely be publicly listed on the PRS Exemptions Register which can be accessed by investors, lenders and tenants alike. Consequently, landlords who violate these regulations risk tarnishing their reputation and encountering challenges securing financing, attracting investors or even retaining tenants.
The underlying aim and objective of these changes is to enforce stricter energy efficient standards which align with efforts to combat climate change and reduce greenhouse gas emissions. Improving the energy efficiency of buildings not only reduces environmental impact but also leads to cost saving for tenants (lower utility bills).
To meet the new minimum requirement, landlords are required to make energy efficient upgrades such as insulation, lighting improvements and heating system enhancements. Seeking advice from energy assessors and qualified professionals can help landlords to identify and assist with measures to take to achieve compliance whilst minimising costs.
The existing requirements are expected to undergo further refinement as there is a proposal to enforce a minimum EPC rating of “C” or higher for commercial properties by 1st April 2027. Furthermore, there is an additional proposal to elevate the standards even more by targeting a minimum EPC rating of “B” or higher by 2030.
The above implemented and proposed changes to the MEES regulations indicate a significant shift in the commercial property sector, placing greater emphasis on energy efficiency and sustainability. Embracing energy efficiency not only benefits the environment but also enhances desirability and value of commercial properties in an increasingly conscious market.
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