As part of the Government’s plans to reach its net zero emissions target by 2050, new regulations are being brought into force concerning commercial property.
From 1st April 2023 new rules on energy efficiency will affect anyone planning to let out or sell a commercial property in England and Wales. From this date, it will be a legal requirement for all commercial rented properties to have an EPC (Energy Performance Certificate) rating of at least E. The Minimum Energy Efficiency Standard (MEES) Regulations had previously only extended to cover commercial and residential properties on a new lease or renewal lease.
After 1st April, it will become unlawful for a landlord to continue to let a ‘substandard’ property – ie. one with an EPC rating lower than ‘E’. The rules are wide-reaching and carry a maximum penalty of £150,000 for non-compliance.
The arrival of these MEES Regulations will inevitably leave some landlords and owners of commercial property facing potentially large upgrading costs. Older properties by their nature may have little in the way of insulation or energy efficiency tools, leaving them with an EPC below the required minimum standard.
Potential works required to get properties up to standard may include anything from modifications for heating, lighting and ventilation to adding internal insulation, floor insulation and improved heating controls.
The regulations do not apply to properties with tenancies of over 99 years or less than six months for a commercial lease. Certain properties types that don’t require an EPC such as industrial sites and workshops are also exempt. Individual properties may be permitted an exemption from the rules – this must be some via a submission to the PRS Exemptions Register. The only other exception to the rules is if where a landlord can show that they have made all possible cost-effective energy efficiency improvements prescribed by MEES yet still don’t meet the minimum rating of ‘E’.
This major stage in MEES regulations is not the end for energy efficiency rules concerning commercial property. The government has signalled its clear intention to raise the MEES threshold for commercial properties to a B rating by April 2030. This may include a staged implementation that requires a C rating to be met by 2027.
As well as undertaking works specifically designed to improve energy efficiency, all major works being undertaken by landlords and property owners should now bear the MEES in mind.
As an example…We have one landlord client who intends to re-roof and re-clad their commercial building in a few years’ time. Dependent upon when he does undertake this work, he will need to install different levels of thermal insulation.
Due to the MEES regulations, further thermal upgrades will be required at some stage. Rather than waiting until the work is actually required, we are considering options for re-cladding and upgrading at an earlier stage as a means of further improving the property’s EPC rating, before the trigger points of the regulations become more onerous.
This is an important point for all landlords to consider as any properties with poor thermal insulation will start to be significantly devalued over the coming years.
Lea Hough can help landlords to assess their options for commercial property renovations; planning the works bearing MEES in mind. In addition to deciding the most cost-effective route, Lea Hough can also project manage the works from start to finish, ensuring a timely programme that is completed to a high standard.
To discuss upgrade or renovation works to a commercial property, please get in touch.
