Minimum Energy Efficiency Standards and Commercial Properties

What are MEES and who do they impact?

MEES set minimum energy efficiency standards which must be met for let properties. The regulations do not apply in respect of property sales. They affect both landlords and tenants of proposed, new and existing leases. They apply to residential and commercial properties, however this article focuses on commercial property only.

The minimum standard is a valid Energy Performance Certificate (“EPC”) rating of E. Ratings of F and G are below the minimum. Where the property falls below the minimum it is known as a “sub-standard property” and the MEES regulations apply.

When do Minimum Energy Efficiency Standards come into force?

1 April 2018 – from this date a new lease cannot be granted for a sub-standard property unless:-

  1. an exemption applies;
  2. all relevant energy efficiency improvements have been made; or
  3. the lease is not caught by the regulations.

1 April 2023 – from this date an existing lease cannot continue where the property is sub-standard unless:-

  1. an exemption applies;
  2. all relevant energy efficiency improvements have been made; or
  3. the lease is not caught by the regulations.

If there is no valid EPC in place at the relevant date for a continuing lease (1 April 2023), the regulations do not impose a positive obligation for an EPC to be commissioned (unless the transaction requires a new EPC). A landlord may therefore consider postponing the commissioning of an EPC to avoid non-compliance with the regulations.

The MEES regulations set out in detail what is considered a “relevant energy efficiency improvement”.

Exemptions to MEES

Exemptions must be validly registered by the landlord otherwise enforcement action may be taken. The exemptions include (subject to satisfaction of the relevant criteria):-

  • Where improvements are not cost-effective or will cause damage to the property.
  • Where the Landlord has been refused consent by a third party.
  • Where the landlord has implemented all cost- effective measures.

Where the MEES regulations do not apply (for example, certain types of property or tenancy) there is no need to register an exemption.

Landlord Considerations

Landlords should consider:-

  • Improvements – if the property is sub-standard, have all relevant energy efficiency improvements been made?
  • EPC’s - the timing of an EPC may be critical if the result is that the property is sub-standard. To retain control, a landlord may consider placing restrictions on a tenant’s ability to commission an EPC. It may also be appropriate to firstly obtain a draft EPC.
  • Foresight – planning ahead and also considering that in the future the minimum standard may be increased.
  • Relevant date- it is important to determine which relevant date applies. This is particularly important for extensions or lease renewals where the tenant has remained in occupation.
  • Improvement costs– the cost of relevant energy efficiency improvements where the property is sub-standard.
  • Non-compliance – may result in enforcement action (including fines and public exposure) and a decrease in the property value. As an existing lease will continue, it may also impact matters such as rent review.
  • Onerous lease – the rental amount a tenant may be willing to pay may decrease if the lease clauses are too onerous. 
  • Consents – are any third party consents required such as a lender or head-landlord?

Tenant Considerations

Tenants should consider:-

  • Sub-standard – if the property you are letting is sub-standard the landlord may be exposed to enforcement action. As the lease itself will continue, rent should be paid and all covenants continue to be observed. 
  • EPC’s – there may be situations where a tenant would need to commission an EPC, for example on lease assignment, and the lease should reflect this.
  • Improvement costs – does the lease allow the landlord to recover the cost of undertaking relevant energy efficiency improvements from the tenant?
  • Improvement works – does the lease require or allow the tenant to carry out energy efficiency improvement works to prevent the property from being sub-standard?..

Questions about Minimum Energy Efficiency Standards in Commercial Properties

Hopefully you have found this guide useful. MEES can be a tricky issue to deal with.

At Frettens, we have one of the largest and most experienced Commercial Property teams in the area, and we are recommended in the Legal 500, an independent Legal Services directory.

Our Commercial Property team are happy to discuss any issues that this raises for you and we offer a free initial meeting or chat on the phone to all new clients.

If you have any questions, you only have to ask us at Frettens. Please call 01202 499255 or 01425 610100 and Charlotte or a member of the team will be happy to chat about your situation and your particular requirements.