Commercial property landlords and tenants should be aware of a major change to the minimum energy efficiency standards (MEES) from April 2023.
The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 established a minimum level of energy efficiency for privately rented property. Since 2018 it has been unlawful to grant new leases or renewals on buildings with less than the minimum energy performance certificate (EPC) of rating E, unless the landlord registered an exemption.
From April 1st, though, that requirement will extend to all existing commercial leases with a term of more than 6 months and less than 99 years, even when there is no change in tenancy arrangements.
Penalty warning
Many leased commercial premises will not meet the minimum level required and landlords could be liable for fines of up to £150,000. The penalty for a property in breach for less than three months is £5,000 or 10% of the rateable value (up to a maximum of £50,000), whichever is higher.
For a breach of more than three months, the penalty is £10,000 or 20% of the rateable value (up to a maximum of £150,000).
It is also important to note that the government is proposing to raise the EPC rating requirement further before the end of the decade, to C by 2027 and B by 2030.
Uncertainty
A recent study by law firm Irwin Mitchell found that there was uncertainty among office decision-makers around MEES and EPCs. When asked about the energy efficiency of buildings they own and occupy,
19% of respondents said they don’t know the EPC rating of their main office and
18% don’t know what rating their office needs to be in order to be compliant from April.
10% of respondents said they don’t understand EPC ratings.
EPC explained
An EPC rates how energy efficient a building is and government guidance says landlords must have an EPC if:
- they rent out or sell the premises
- a building under construction is finished
- there are changes to the number of parts used for separate occupation and these changes involve providing or extending fixed heating, air conditioning or mechanical ventilation systems
Landlords can be fined between £500 and £5,000 based on the rateable value of the building if they don’t make an EPC available to a prospective buyer or tenant.
Further information on minimum energy efficiency standards (MEES) for non-domestic properties is available from the government website.
