Minimum Energy Efficiency Standards (MEES) Solicitors
Rowena Wilkinson, Commercial Property Solicitor at our Bramhall office, considers the new MEES regulations and what a landlord needs to do to be compliant with them.
From 1st April 2018 the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015/962) introduced a new legal standard for minimum energy efficiencies in rented commercial properties.
The minimum Energy Efficiency Standards (MEES) required commercial landlords entering into a new lease to have an energy efficiency rating of “E” or above. Properties with an Energy Performance Certificate (EPC) rating of “F” or G” were treated as being “sub-standard”, and it was deemed unlawful to grant a new lease without improvements being made or an exemption being registered.
The Energy Performance of Buildings (England and Wales) 2012 regulations require an EPC to be produced whenever a domestic or non-domestic building is constructed, sold, or let.
What are the new Minimum Energy Efficiency Standards?
As of 1 April 2023, the MEES Regulations have been amended. It is now unlawful to continue to let a commercial property that has an EPC rating of lower than E.
This means the Regulations are now applied retrospectively regardless of when the lease was entered into. All commercial landlords must meet these requirements unless they can claim a legitimate reason for continuing to let the property or an exemption.
How will this change affect landlords?
In the short term, landlords will need to consider immediately reviewing their commercial properties to ensure they have an EPC rating of “E” or above.
Where this is not the case, landlords will need to carry out the necessary work to bring their commercial property up to standard or apply for one of the exemptions if applicable.
Landlords should consider the possibility of the rating increasing to band “B” in future and whether any works required now should account for future proofing.
It is essential to ensure that where the landlord is entering into a new lease, provisions be made in the lease to allow the landlord access to carry out EPC improvement works and consider passing the costs and obligations in respect of any future improvements required on to the tenant.
Landlords may have the option of charging the tenant for the cost of any required improvement works via a service charge.
How will this change affect tenants?
It is important to note that sub-leases fall under the remit of MEES regulations. This means that the new measures to improve energy efficiency prohibit a tenant from being able to grant a sub-lease on a property unless it is improved to at least an E rating, or a valid exemption is in place.
If works need to be taken to improve a property that has an EPC rating of less that E, a landlord may need access to a tenants’ premises to conduct their necessary works. Aside from situations where the relevant lease reserves a right of access, the landlord will need to rely on the tenant granting.
As can be expected, this could be very disruptive for tenants who heavily rely on the premises and would lose out while the works are ongoing. It will likely be up to the discretion of the landlord and tenant how they arrange for the works to be completed and whether any additional arrangements need to be made.
What legitimate reasons and exemptions may apply?
As mentioned above, there are strict requirements for commercial landlords to follow the new regulations. However, examples of legitimate reasons or exceptions they could use include:
- All relevant energy efficiency improvements have been carried out or none can be made and the property remains sub-standard;
- The cost of the improvement would be more than the savings on energy bills over a period of 7 years;
- Where recommended wall insulation would have a negative impact on the fabric or structure of the property;
- Where the landlord is unable to gain the relevant consents from the Tenant or third party to carry out the works;
- If you are a new landlord in which case a 6-month exemption may be available; and
- Where the relevant works will devalue the property by 5% or the works will damage the property.
To register any of the above exemptions a landlord must enter certain required information in the PRS Exemptions Register.
What is the minimum EPC for commercial property?
With the new updates now in place, it is considered unlawful to let any commercial property where the EPC rating is below an E.
Can you let a commercial property with an EPC rating of F?
No. A minimum EPC rating of E applies to all non-domestic private rented property. This applies to both existing and newly granted leases. If the EPC rating is either F or G, it will not be lawful for the landlord to let the commercial property.
Are there penalties for non-compliance with the Minimum Energy Efficiency Standards?
Failing to comply with Minimum Energy Efficiency Standards as of 1 April 2023 could cause significant complications for landlords.
If a landlord is in breach of MEES regulations, they may be subject to either a financial penalty up to a maximum of £150,000 and/or a publication penalty where the breach is entered into the public section of the PRS Exemption Register.
What are the EPC requirements for commercial properties in 2025?
Target dates have already been set to amend the existing MEES regulations even further. From 2025, the minimum energy efficiency requirement for the purposes of MEES will be raised to a C rating. This means that all newly rented properties (residential and commercial) will need to reach an EPC rating of C or above.
Following on from this, any existing rented properties must have an EPC rating of C or above by 2028.
How our MEES solicitors can help
As discussed, the new MEES regulations are likely to have a significant impact on commercial landlords, particularly those who own properties with an EPC rating of less than E. Improving energy efficiency may be necessary for many landlords but, equally, exemptions could also apply which mean that you do not need to take any further action.
It is essential that you understand your current position in detail and are also well-prepared for the additional changes that are due to come into effect in 2025. Failing to take a proactive approach could have serious repercussions further down the line.
At Butcher & Barlow, our MEES solicitors provide a comprehensive legal service for commercial landlords, taking the time to understand your current situation, priorities, and essential requirements.
We understand that the prospect of incurring a penalty as a result of the new Minimum Energy Efficiency Standards can be daunting – particularly if you do not know what steps to take. When instructed, our Partner-led team will be sure to clearly explain your options in detail and help you to understand exactly what you need to do in both the short and long-term.
If you would like to arrange an appointment with our MEES solicitors, whether that is by video, telephone or in person, please get in touch. You can email enquiries@butcher-barlow.co.uk or use our online enquiry form and a member of our team will get back to you as soon as possible.