The Minimum Energy Efficiency Standard (MEES)
What are MEES?
They are regulations which relate to energy efficiency ratings of commercial properties. The current ratings range from A-G, A being the most energy efficient and G the least.
The regulations state that from 1st April this year any commercial property that has an Energy Performance Certificate (EPC) of lower than E cannot be rented out to new tenants. Existing tenancies also cannot be renewed until the property obtains at least an E rating. It is estimated that this will affect around one fifth of all commercially rented properties in the UK.
From 1st April 2023 the regulations will extend to all existing commercial leases. Therefore, from this date landlords will no longer be able to continue to let properties that have an EPC rating of lower than E.
What does this mean for commercial landlords?
There is clearly a risk to landlords in not being able to let their properties and in facing possible fines.
What are the penalties for MEES non-compliance?
Non-compliance can result in significant penalties. The penalties are based on the property’s rateable value and can be as much as £150,000!
Are there exemptions from MEES?
Yes – here are some:
- Temporary exemption of six months for new landlords.
- The property will be exempted if it is found that efficiency measures would decrease the property’s value by 5% or more.
- Seven-year payback test: landlord’s will only be required to make energy efficiency improvements that have an expected payback within seven years or less, i.e. the predicted energy savings over a seven-year period are greater than or equivalent to the cost of the works.
- Properties exempt from the EPC Regulations are also exempt from MEES.
- If you are unable to obtain requisite third-party consents to the efficiency measures.
What steps can landlords take?
Commercial landlords can protect themselves by taking the following steps:
- Check whether the Minimum Energy Efficiency Standard applies to their property by ensuring that they have a valid EPC in place and that their EPC is at least an E rating.
- Consider taking action if your property is rated D or E as upon renewal of the EPC it is possible that the rating of the property could decline below E (or that legislation might further tighten the minimum standards).
- If your property has an EPC rating of F or G and no exemptions are available, you will need to take action to improve your rating. By virtue of the seven-year test all measures that are implemented should be cost-effective and provide energy savings in the long term.
- Consider the impact of MEES in all refurbishment and development projects relating to your property.
Are commercial tenants also at risk from MEES regulations?
There is also a potential indirect risk to tenants who may find from 1 April 2023 that their existing tenancies are put at risk if the properties to which they relate are non-compliant with the regulations. It is unclear what the ramifications of this might be.
In terms of the lease itself it is unlikely that the failure to achieve an E rating would be a breach of the repairing covenant unless it explicitly said so in the lease. The regulations may however influence dilapidations at the end of the term. If a landlord is required to undertake works to improve the energy efficiency of the property to re-let it, this might mean there is very little point in a tenant carrying out repairs in order to comply with its repair covenant if these repairs should overlap with the works that the landlord is planning to undertake.
In such circumstances tenants should seek professional advice to ensure that they do not pay for something unnecessarily.
How rhw can help with MEES
If you are a landlord, we can help you to find out whether your property is MEES compliant or not. If it is not, we can advise you whether there may be any applicable exemptions failing which we will let you know the steps you need to take to make your property compliant.
If you are a tenant, we can advise how the regulations will affect you and whether there may be scope to save on dilapidation costs at the end of your lease.
If you are a tenant or a landlord and need advice on a commercial tenancy, or if you require legal advice on any commercial property matter then please contact either Brian Shacklady or Jack Lightburn on Guildford 01483 302000 or email firstname.lastname@example.org