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Minimum Energy Efficiency Standards (MEES) - Commercial Properties

The rules on MEES (Minimum Energy Efficiency Standards) are contained in The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (MEES Regulations).

The MEES Regulations only apply to properties that are required to have an EPC.

The position for commercial properties is that it is currently unlawful to grant a lease on a property with an EPC rating of F or G, (these being deemed sub-standard under the MEES Regulations). This is unless one of the exemptions set out in the MEES Regulations applies. These exemptions include the:

• "reduction in market value" exemption where improvement works would reduce the market value of the property by 5% or more (as supported by a RICS registered valuer)
• "consent exemption" where the ability to undertake improvement works is restricted by a third party (such as consent of a superior freeholder, tenant, lender or the local authority); and
• the "allimprovements made" exemption being when all the necessary energy efficiency improvements have been done (or there are none that could be undertaken) and the property remains sub-standard, or situations where such works would exceed the 7-year payback rule (i.e. the intended value of savings on energy over a 7-year period is less than the sum to be incurred in carrying out the works/improvements).

There are other limited temporary exemptions and for these to be valid, these need to be registered in the national PRS exemptions register which is open for public inspection. Exemptions are time-limited so extra care should be taken to regularly check and ensure that each exemption still applies particularly following key milestones such as a sale or transfer.

KEY CHANGES FROM 1 APRIL 2023?

From 1 April 2023 it became unlawful to continue to let a commercial premises with an F or G EPC rating. This is even if the lease was granted before the MEES Regulations came into force in 2018.

DO THE MEES REGULATIONS APPLY TO ALL COMMERCIAL LEASES?

The MEES Regulations are only applicable to properties that are required to have an EPC; so, any property that does not need an EPC is not affected.

The requirements for needing an EPC are within the Energy Performance of Buildings (England and Wales) Regulations 2012 (EPC Regulations) and there are common misunderstandings about trigger events for an EPC and its relationship with the MEES Regulations. Advice should be sought if you are unsure whether an EPC is required and to avoid unknowingly triggering a MEES liability.

POSSIBLE EXCLUSIONS

Some types of commercial properties and certain extremely long or extremely short leases are expressly excluded from the MEES Regulations, these exclusions are fairly limited.

This does not include licences to occupy but please note that this must be a genuine licence: the name of a document as a license alone will not be accepted as conclusive.

Please take from this that most commercial leases are covered by the Regulations.

Whether or not the MEES Regulations apply needs to be fully considered on a property by property basis.

WHAT IF YOU BREACH OF THE MEES REGULATIONS?

The MEES Regulations do not require a landlord to physically undertake necessary works by law, but landlords will be held liable if found to be in breach. Penalties are chiefly financial penalties (ranging from between £5,000 to £150,000 depending on severity) along with reputational risks as breaches are published on a public register. Any breaches are to be enforced by Local Trading Standards.

Please note that 59 local authorities have recently been awarded government funding to assist with enforcement.

OTHER PLANNED CHANGES TO LEGISLATION

Legislative amendments to the MEES Regulations are expected in the near future. Although they have not yet been set in legislation. The Government has already consulted on numerous significant changes including the phased implementation to raise the minimum standard (currently an E) to a C EPC rating by 1 April 2027 and a B EPC rating by 1 April 2030.This is intended to run under 2-year "compliance windows" where it will become obligatory for all commercial, tenanted properties to have an EPC and to register this on a new public database by 1 April 2025 (C EPC rating) and 1 April 2028 (B EPC rating).

Evidence of a landlord's compliance, or an accepted registered exemption will need to be in place by the enforcement dates of 1 April 2027 (for a C EPC rating) 2 and 1 April 2030 (for a B EPC rating) respectively. The obligation to maintain a valid EPC at all times is also under consideration this would cover numerous properties that may have otherwise escaped a MEES liability by virtue of an EPC's expiry.

WHAT TO CONSIDER NOW - KEY DATES FOR COMMERCIAL PROPERTIES

1 April 2018 - Unlawful to grant new leases of commercial property with an EPC rating of below E (minimum required standard)

1 April 2023 - Unlawful to "continue to let" commercial property with an EPC rating of below E (minimum required standard)

1 April 2025 - Requirement to register a valid EPC for let, commercial property (date not yet confirmed)

1 April 2027 - The minimum standard raised to EPC rating C (date not yet confirmed)

1 April 2028 - Further requirement to register a valid EPC for let, commercial property (date no yet confirmed)

1 April 2030 - The minimum standard raised to EPC rating B (date not yet confirmed)

If you are a landlord, tenant or developer, we would be delighted to discuss how Forbes Solicitors LLP could support you in compliance with the requirements of the current and proposed MEES Regulations and mitigate any possible breaches of the same.

For more information contact Georgina Kenny in our Property Litigation department via email or phone on 0161 9180006. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Property Litigation department here

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