What commercial landlords need to watch out for under the new MEES regulation

Thousands of commercial properties across the UK won’t meet new energy efficiency regulations, incurring costs/fines for landlords, and potentially disrupting businesses, according to new research.

Related topics:  Landlords
Property Reporter
15th March 2022
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From April 2023, an extension of the MEES regulation will prohibit landlords from leasing out commercial buildings with an EPC rating of F or lower.

Researchers at Bensons Gas Engineering have analysed the EPC ratings of rented non-domestic properties in the UK and how leased property energy efficiency compares to the standard ratings across the UK non-domestic market.

MEES, or Minimum Energy Efficiency Standards, are minimum requirements for EPC ratings enforced by the government. These regulations are being extended in April 2023.

From April 2023, UK landlords will not be able to grant or renew a policy for a tenant if their commercial property has an EPC (Energy Performance Certificate) rating of F or lower. Fines for continuing to let a property from this date will amount to a minimum of £5,000, up to £150,000.

In order to improve the EPC rating of a commercial building, the landlord must have work carried out to increase the property’s energy efficiency, such as replacing the boiler or insulating the property.

Tenants may be asked to leave the property whilst work is being carried out to improve energy efficiency. They may also be asked to contribute towards the cost of the works.

The research found that theatres, music halls and cinemas across the UK are the non-domestic leased properties that were least likely to meet the new MEES regulations, with 47.2% having an EPC rating of F or G.

Libraries and museums follow with 37% having an EPC rating of F or G.

Among the best insulted and energy-efficient commercial buildings are hotels with only 2.9% having an EPC rating of F or below and passenger terminals with 3.1% having an EPC rating of F or G.

The research revealed that landlords are offloading properties not meeting MEES, with 13.3% of commercial properties for sale having an EPC rating of F or G.

10.13% of commercial properties currently leased out do not have an adequate EPC rating of E or above, so it’s important for tenants to check the history of a building to prevent their business from being evicted or disrupted when the new law comes into place in April 2023.

Richmondshire has the highest number of properties (19.7%) with an EPC rating of F or G. Commercial buildings in this area tend to be less insulated and therefore less energy efficient.

Buckinghamshire has the lowest number of properties with an EPC rating of F or G, at just 1.9%.

Westminster has the highest number of properties that fail to meet the new EPC E requirement, with 831 commercial properties out of 6,946 in the area (12%) receiving an F or G rating.

When looking for a new property to purchase or rent, you should look for a commercial building with at least an EPC rating of E or above. Purchasing or renting a property with a lower EPC rating than E, could lead to difficulties when the new UK law is enforced in April 2023.

Dale Goodman at Bensons Gas Engineering, said: “The new MEES regulations will apply to all of England and Wales, including new leases and where a lease is currently in place. If you rent out a property after April 2023, you could incur a large fine and be prohibited from continuing to let the property until relevant improvement works are made.

“To ensure you’re not caught out by the change, you should have an energy efficiency assessor check that your property’s EPC rating is at least an E or above ahead of the deadline.

“As a landlord looking to purchase a property, it is extremely important to investigate the building’s history.

“Research the property to find out why it’s on the market. Otherwise, you could find yourself buying a commercial building with a very low EPC rating, leading to higher improvement costs. Unless you can complete this work, or have a valid exemption in place, you won’t be able to rent the property out after April 2023.

“However, exemptions will only last five years meaning the improvement works will have to be carried out in the near future.

“If you’re looking to sell the property it is also important to note that the valuation will be much lower if the relevant improvement works are not made. As a tenant looking to lease a commercial property, you should make sure the building has at least an EPC rating of E.

“Leasing a commercial property with an EPC rating lower than this could lead to eviction, disrupting your business and potentially putting you out of pocket if asked to contribute towards energy improvement costs.”

Improving the EPC rating of your commercial property will be essential from April 2023. You can do this by:

Replacing the boiler. Opting for a new energy-efficient boiler can cut down energy bills and reduce the building’s EPC rating.

Installing double glazing. Upgrading your windows and doors to double glazing can improve your EPC rating and reduce noise.

Installing wall insulation. Insulating your walls can reduce your EPC rating significantly, making sure no energy is lost.

Installing a renewable energy source. Installing solar panels can improve your EPC rating and provide you with cheaper, greener energy.

The energy efficiency assessor providing the EPC rating will suggest the most effective improvements that can be made.

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