From April 2018, rented commercial properties will have to meet certain minimum energy efficiency standards (MEES). The MEES are designed to reduce greenhouse gas emissions and are part of the UK’s efforts to hit its greenhouse gas emission reduction targets.
From April 2018, it will be illegal to extend existing leases or to grant new leases unless the premises rates at least an “E” on its Energy Performance Certificate. From April 2023, MEES extends to cover all leases including where a lease is already in place.
Does MEES apply to your property?
Will your rental property need to comply with the MEES by April 2018? Your property will be exempt if any one of the following applies:
- property types that do not require an EPC under current regulations e.g. industrial sites, workshops, non-residential agricultural buildings, listed buildings;
- property that is leased for less than six months with no right of renewal;
- property that is leased is for more than 99 years;
- an independent surveyor determines that the property would lose more than 5% of its value as a result of work done to bring it up to “E” standard;
- the consent of a third party to bring the property up to “E” standard cannot be obtained; or
- work done to bring the property up to “E” standard would not pay for itself through energy savings within seven years.
The regulations will be enforced by Trading Standards Officers. Penalties will be based on the rateable value of the property up to a maximum of £150,000 per occasion.
Impact on landlords
MEES will have significant impacts for landlords including:
- it will make some properties illegal to let unless they are upgraded to meet the minimum standards. It is estimated that approximately 20% of non-domestic properties are in the “F” and “G” rating brackets;
- valuations of such properties could be affected if their marketability is diminished;
- rent reviews for properties in this category could be affected;
- implications for dilapidations assessments may also arise.
Ways to ease the burden
For landlords there may be some ways that you can ease the burden of carrying out the work. If, for example, the lease terms do not allow sufficient rights of entry the property may be caught by an exemption.
Alternatively, some leases due to be renewed by April 2018 may allow early renewal. Renewing the lease before April 2018 (before the MEES standards are compulsory) would give more time to carry out the necessary work before the hard deadline of April 2023. In addition, there may be some lease terms relating to service charges or statutory compliance that could allow recovery some of the cost of the work from the tenant.
Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.
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