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UK Real Estate Insights
From 1 April 2023 the next phase of the Minimum Energy Efficiency Standard (MEES) regulations will come into force. This extends the scope of MEES from new leases of ‘sub-standard’ commercial property to existing leases of ‘sub-standard’ commercial property, in some cases, granted many years ago.
The upcoming MEES milestone makes it unlawful for a landlord of a commercial property to ‘continue’ letting a property with an EPC rating of F or G (a ‘sub-standard’ property) unless:
Commercial landlords should urgently audit the energy efficiency levels of all let property within their portfolio and carry out all relevant improvement works and/or register an exemption.
MEES do not apply to:
The following permitted exemptions are available for landlords:
Exemptions (except the ‘new landlord’ exemption) only last for 5 years and must be reapplied for after expiry. They cannot be transferred to successors.
Where a landlord ‘continues’ to let a sub-standard property, it will breach MEES. Local Weights and Measures Authorities (part of Trading Standards) can impose financial penalties of up to £150,000 based on a property’s rateable value. Non-compliant landlords may also be ‘named and shamed’, causing reputational damage.
The government has signalled its clear intention to raise the MEES threshold for commercial properties to a B rating by April 2030, with a possible staged implementation requiring a C rating by 2027.
Whilst these proposals have not yet been made into law, if passed they will have a dramatic impact on many commercial landlords as it is notoriously difficult to achieve an EPC rating of B (or higher).
The environmental credentials of commercial landlords are being scrutinised in a way never seen before and widespread commitments to ESG investment are being made. The energy efficiency of buildings is increasingly taken into account in valuing property. Landlords must act now to improve the energy efficiency of their properties. Ultimately such steps will prove crucial, not only for the retention of existing and attraction of new tenants, but for any financing and sale of property in the future.
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