Minimum Energy Efficiency Standards (MEES) in non-domestic buildings
Most landlords and commercial agents will be aware that as of 1 April 2018 it has been unlawful to let a commercial property with an Energy Performance Certificate rating of ‘F’ or ‘G’ (the two lowest grades of energy efficiency). This applies to both new leases and renewal leases.
From 1 April 2023 it will become unlawful to continue to let property in breach of the regulations.
The energy efficiency of a building is assessed as part of preparing an Energy Performance Certificate (EPC). An EPC is required at the point of marketing a building for sale or to rent. You can find existing EPCs for a building at: https://find-energy-certificate.digital.communities.gov.uk/. Certificates are valid for 10 years.
There are a number of exemptions from a need to comply with the regulations that are available to landlords, such as property remaining substandard despite works, wall insulation exemption, and consent unobtainable exemption. Most exemptions are only valid for 5 years, after which efforts to improve the rating must be tried again and no exemption has effect unless registered.
Enforcement is carried out by the local authority. They have a wide range of powers if they suspect a building may be let in breach of the MEES regulations, such as initial notices requiring the landlord to provide them with an EPC and the tenancy agreement for the property, through to financial penalties capped at £5,000 per property.
Landlords should be wary: the Government is committed to a green agenda which includes improving energy standards of buildings throughout England and Wales, and there is every expectation that the minimum energy rating on non-domestic property will increase to B and C or better by 2030.
Landlords with substandard stock should start making plans for energy efficiency upgrades now in order to spread the cost of meeting this minimum energy requirement by 1 April 2023. Failure to do so could see them risk a mad scramble to make improvements at the last minute to facilitate a letting, or face a possible enforcement action including a fine, and even the very real potential of loss of value of their asset.
Those hoping to pass the cost of upgrade works on to tenants should beware, as traditional ‘compliance with laws’ clauses only extend to alterations for use and occupation and will not catch this statutory compliance. Similarly, tenants are likely to deem energy efficiency works as an unreasonable service charge cost. However, what landlords should be doing is including energy efficiency clauses in their leases to ensure that tenants do not obtain EPCs that could put the landlord in breach, and do not make alterations that reduce the energy efficiency of the building. Landlords may need to weigh up whether they wish to carve out a right of entry to carry out energy efficiency works during the lease term against not having such a right but being able to take advantage of the consent unobtainable exemption.
Contact our commercial property lawyers in Brighton & Hove, Uckfield, Sevenoaks and Ashford
For advice on how to prepare your property for MEES regulations, what exemptions are available to you and how to amend your tenancy agreements to protect yourself from enforcement please contact Chartered Legal Executive, Joanna Bryan e. email@example.com t. 01825 744 426