ATTENTION COMMERCIAL LANDLORDS!

New Regulations Relating to Minimum EPC Ratings Come Into Effect Next Year!

From 1 April 2018, a new legal standard for minimum energy efficiency will apply to rented commercial buildings.  Landlords of buildings within the scope of the Minimum Energy Efficiency Standard (MEES) regulations must not renew existing tenancies or grant new tenancies if the building has less than the minimum energy performance certificate (EPC) rating of E unless the landlord registers an ‘exemption’.

The new MEES regulations do not, however, apply in the following situations:

• Where building are not required to have an EPC: such as some industrial/ storage units with a low energy demand, certain listed buildings, temporary building and holiday lets.
  
• Buildings where an EPC is over 10 years old or where there is no EPC
• Tenancies of less than 6 months (with no right to renewal)
• Tenancies of over 99 years

What are the ‘exemptions’?

‘Exemptions’ include the following:

• Where an independent assessor determines that all relevant energy efficiency improvements have been made to the property or that improvements that could be made but have not been made would not pay for themselves through energy savings within 7 years.
• Where an independent surveyor determines that the relevant improvements that could be made to achieve the required standard are likely to reduce the market value of the property by more than 5%
• Where consent from persons such as a tenant, a superior landlord or planning authorities has been refused or has been given with conditions with which the landlord could not unreasonably comply.

Despite the above ‘MEES’ is likely to affect the majority of commercial property on the market and if you have premises which are on the market now or about to come to the market it makes sense to review the current EPC rating to establish whether appropriate action may need taken.  In some instances an EPC rating might be capable of improvement to the requisite level simply by changing light bulbs to a more energy efficient equivalent or perhaps the light fittings themselves (eg from basic fluorescent units to an LED type) and therefore at relatively low cost.  And in doing so this could have the added advantage of improving the specification of the premises and assisting with marketability.

In any event landlords would be well advised to consider the implications for their commercial property portfolios as action may well be required prior to re-letting or renewing leases.

It is worth noting that from 1st April 2023 MEES will be extended to cover all leases, including where a lease is already in place!