The Minimum Energy Efficiency Standard (“MEES”) for commercial properties – upcoming changes for landlords and tenants.

• United Kingdom

• Environment
• Health and safety
• Real estate

31-10-2019

On the 15 October 2019 the government published its consultation on the future trajectory of the Minimum Energy Efficiency Standard for commercial properties under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (“MEES Regulations”). The consultation is the latest development in the energy reduction arena and reflects the government’s commitment made in October 2017 to support businesses to reduce their energy use by at least 20% by 2030.

The future trajectory

The MEES Regulations provide that from the 1 April 2018 it is unlawful for a landlord to let a commercial property with an EPC rating below an E (unless an exemption applies and is registered). From 1 April 2023, this prohibition will apply to all existing leases meaning a landlord cannot continue to let a commercial property with an EPC rating below an E (unless an exemption applies and is registered).

The consultation seeks views on increasing the minimum standard from an E, providing two potential targets to tighten minimum energy efficiency standards. These are:

1. Raising the minimum EPC requirement to B by 2030 (the preferred trajectory); or
2. Raising the minimum EPC requirement to C by 2030 (the alternative trajectory).

The consultation seeks views on whether to increase the minimum EPC on a single implementation date i.e. by legislating that all commercial properties cannot continue to be let after 31 March 2030 unless they have reached a B or a C, or by increasing the EPC minimum standard by setting incremental milestones, for example, D by 2025, C by 2028 and B by 2030 (unless an exemption applies).

Under the government’s proposals, the existing exemptions in the MEES Regulations will remain, including the requirement for energy efficiency measures to be cost effective. The 7 year pay back test will continue to apply. In its consultation the government has invited views on the effectiveness of the current exemptions under the above trajectories.

The government expects that both trajectories would deliver benefits to the UK economy and instigate a closer correlation between the rental value of a property and its energy efficiency. The government believes that this will drive a cycle of improvement, resulting in a return on investment for the landlord and lower energy bills for the tenant. A win-win?

Enforcement

The current provisions in the MEES Regulations on enforcement and penalties will continue to apply. In the consultation the government states that effective enforcement will be key to the success of both the current and future minimum efficiency standards. A pilot project across seven local authorities is currently ongoing to determine how best the regulations can be enforced. Therefore, whilst active enforcement of the MEES Regulations to date has been limited, this could change in the future.

Next steps-act now

The intention is that by setting a clear trajectory to 2030, landlords and tenants should have time to act. Therefore it is imperative that both landlords and tenants prepare now by assessing their property portfolios, considering whether there is a valid and accurate EPC for their properties, checking relevant lease terms and considering the applicability of exemptions under the MEES Regulations. 

The consultation will close on 7 January 2020. You can respond to the consultation here.

The government has also stated that it will consult in 2020 on introducing mandatory in-use energy performance ratings for commercial property in the private sector.

In relation to domestic properties, the government is expected to consult on increasing the minimum energy efficiency standard during winter 2019/20.

For further information please contact Jane Southworth or Rachael Tattersall.  Details regarding our environmental work can also be found here.