MEES: Minimum Energy Efficiency Standards for commercial properties
Many landlords have long been expecting the introduction of Minimum Energy Efficiency Standards (MEES) since the rollout of the commercial Energy Performance Certificate (EPC) in April 2008. Some owners still risk fines by not having an EPC on a building when selling or letting the property.
We are often asked to advise landlords, freehold investors and lenders on MEES. The standards state that:
a) from 1 April 2018, landlords of non-domestic private rented properties (including public sector landlords) may not grant a tenancy to new or existing tenants if their property has an EPC rating of band F or G (shown on a valid Energy Performance Certificate for the property).
b) from 1 April 2023, landlords must not continue letting a non-domestic property which is already let if that property has an EPC rating of band F or G.
Enforcement of the regulations is to be from the local Trading Standards Office, with a maximum fine of £150,000 and minimum fine of £5,000.
MEES are also impacting commercial financing. We are seeing a real toughening of stance from lenders who will refuse to take commercial property as security where the asset does not have an EPC. In addition where a building does not comply with MEES, the bank will require an adjustment or retention to the mortgage to reflect the cost of compliance.
There are some exemptions which can be sought, although it’s worth noting that all exemptions are owner specific and do not run with the property. If a sale takes place the new owner will be required to either improve or seek a new exemption.
One exemption that we regularly encounter is that the improvements will not repay within 7 years – the latest guidance suggests that this exemption will be much more onerous than previously anticipated. The exemptions are ever evolving and we are happy to discuss these on a case by case basis.
Now is the time to deal with EPC issues, even if there is an existing tenancy in place or a new letting to conclude prior to the implementation of MEES. Any new lease could be negotiated to include green clauses which would enable the landlord and tenant to work together to improve the efficiency of the building – protecting the long-term life of the building, and reducing running costs for the tenant.
Led by Fenn Wright partner, Nigel Berry, our building consultancy team provide landlords with advice on achieving minimum standards in the most cost-effective way. The team has also been tendering and overseeing the works required and liaising with expert energy consultants to re-certify the property.
If you’re looking to sell or let a commercial property, our team of chartered surveyors are up to date with the current EPC regulations and can advise on the implications of MEES and what it means for you. With our expert knowledge, we can ensure that you don’t fall foul of the regulations, and as the most active agents in Suffolk for the fourth year in a row, ensure that you achieve the best price possible.
If you would like to discuss MEES or any aspect of your commercial property – please contact your local Commercial agent.