From 1 April 2018, the Minimum Energy Efficiency Standard Regulations (MEES) require landlords of commercial buildings to make all relevant energy efficiency improvements to their property to be able to grant a new lease, or a renewal lease, to a tenant. Currently the minimum rating that a building must achieve in its Energy Performance Certificate (EPC) is a rating of E (on a scale of A-G, with A being the highest rating).
From 1 April 2023, it will be unlawful for a landlord to continue to let a commercial property which has a rating which is lower than E unless an exemption applies and has been validly registered on the PRS Exemptions Register. This means that landlords must carry out any necessary energy improvement works to raise the rating of their property to an E or higher where it does not meet the minimum E rating.
Landlords should therefore check as soon as possible before 1 April what the current EPC rating for their property is and, where necessary, review their leases to ascertain whether they have the right to enter onto the property to carry out the improvement works. If this right has not been reserved, the tenant’s consent will be needed.
Looking to the future, a 2021 Government consultation on energy efficiency of commercial buildings recommended that the minimum EPC rating is increased to a minimum C rating in 2027 and a minimum rating of B by 2030. Currently this is just a proposal in the 2021 report and the Government is yet to respond to it but it is likely that the minimum rating will be increased again at a date in the future, and landlords may therefore want to have a plan in place to make necessary improvements to their property, enabling the cost of these to be spread out over time.
The Government is also considering changing what is measured by EPCs so that they become a performance-based rating evaluating the actual energy consumption of a building and its associated emissions. This would be different to the current EPC rating method which evaluates a building’s fabric and services and does not take account of its use by its occupiers.
A purchaser of a commercial property which they intend to let should consider the EPC rating of the building they intend to buy and, where the rating does not meet the minimum E, ascertain how much it will cost to carry out the works to make the improvements. From 1 April 2023 it is possible to register a temporary 6 month exemption to allow for the improvement works, or a longer period if needed.
If you would like to discuss the implications of anything in this article for your specific circumstances, please contact Miriam Carr.