5th February 2024 ❘

Minimum Energy Efficiency Standards for Commercial Properties

EPC Requirements

Minimum Energy Efficiency Standards for Commercial Properties… As a Commercial Property team, we regularly speak with landlords and tenants who are unaware of the current Minimum Energy Efficiency Standards (MEES) and their proposed changes.

As of the 1st of April 2023, commercial properties are required to have an Energy Performance Certificate (EPC) rating of at least E.

This may sound familiar to many of you who are aware of the requirement for an EPC rating of at least E on new leases and the extension or renewal of an existing lease, as this has been the position since 2018. However, the key difference in the current MEES regulations is that a minimum EPC of E is now also required for the continuation of any existing lease or tenancy of a property. This means that if you have a lease currently in place where the EPC rating is below E, you may face penalties, including (if you are a landlord) a fine of up to £5000.

Can I expect further change to the MEES?

The government has proposed raising the MEES for commercial properties in 2027 and 2030. By 2027 the Government wants to enforce a minimum rating of C. They have proposed an even higher minimum rating of B by 2030.

What should I do?

It very much depends on your circumstances…

Landlords

  • Where leases were entered into prior to the 1st of April 2018 you should review the EPC ratings in these properties to ensure that all are rated E or above.
  • If you are purchasing a property to let it, or own a property which you let, it may be beneficial to assess the potential cost of increasing the energy performance of the property and factoring this into your plans.
  • If you are thinking of granting a new lease of the property, we may be able to negotiate the lease to place the obligation to improve the EPC rating of the property (if required by legislation) on the tenant, at their own cost. However, the effectiveness of such drafting has not been tested at the courts.
  • In all cases, you should review the Government EPC Exemption guidance and check whether your property falls into any of the categories. Moving forward, you could consider utilising green leases or adding green lease clauses to your standard leases.

Tenants

  • If you are a tenant taking a new lease of a property, it is important that you conduct your due diligence, assess the potential cost of increasing the energy performance of the property, or negotiate a lease which places the obligation to improve the EPC rating of the property (if required by legislation) on the landlord, at their own cost.

We’ll soon be sharing another blog with further information on Green Leases. In the meantime, if we can be of help, please don’t hesitate to get in touch.