Gemma Smith, senior associate solicitor in law firm Blandy & Blandy’s commercial property team, provides an update on the Minimum Energy Efficiency (MEES) Regulations.
Since April 1, 2020 it has been unlawful for landlords of commercial property to grant a new lease where the EPC is below an E rating without carrying out improvements and/or registering an exemption.
The new requirements in effect from April 1, 2023 mean that it is unlawful to continue to let a commercial property where the EPC is below an E.
These requirements do not mean that a lease which is currently in place would fall away or that the landlord has the right to terminate the lease, but rather that landlords should not continue to accept rent until the property complies with the regulations.
This may mean carrying out improvements or registering an exemption. It may be that if the lease was granted before MEES clauses were standard, the lease does not allow the landlord to enter the property for the purpose of carrying out such works. Even in these circumstances, an exemption would need to be considered and applied for.
The latest requirements are the last to come into force from those envisaged in the rules initially set out in 2018, but it seems certain that further, more stringent requirements will follow.
Current proposals set April 1, 2025 as the target date for increasing the minimum energy efficiency rating requirement for the purposes of MEES to a C, with a window to April 1, 2027 to bring any sub-standard property up to standard.
There will then be a further target of an increase to a minimum B rating from April 1, 2030. This will have a wide-ranging impact on commercial landlords as a large majority of commercial properties are below a B rating and the age and construction of many commercial properties may make it impossible to achieve a B rating.
A crucial proposal is the requirement for a valid EPC to be in place for let commercial property at all times. As the current MEES regulations only apply to a property where there is a valid EPC in place, many landlords have relied on the grey area as to whether an EPC is required on the renewal of a lease to avoid triggering the MEES Regulations where an EPC would have a low rating.
This is particularly the case where the previous EPC has expired and there is a concern that the property may fall below the current MEES requirement of an E.
Landlords to Take Action
Landlords must review their portfolios now to avoid having to do this and potentially carry out works within a limited amount of time. This will also allow the associated costs to be spread over the next few years. Draft EPCs could be obtained for property where they are not currently legally required. This would give a clearer picture of what will be necessary over the coming years without placing the landlord in breach by being formally lodged on the EPC register.
For further information or legal advice, please visit www.blandy.co.uk.
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