Commercial Landlords – Are you ready for the 1 April 2023 MEES regulation changes?

Since 1 April 2018, the Minimum Energy Efficiency Standards (MEES) have required commercial landlords to ensure that their commercial properties in England and Wales have a minimum Energy Performance Certificate (EPC) rating of E before granting a new tenancy to new or existing tenants, unless a valid exemption applies.

An EPC rating of F or G since 1 April 2018 has been recognised as sub-standard for MEES purposes. In a significant extension of these rules, from 1 April 2023 it will be unlawful for a landlord to continue to let a commercial property with a sub-standard rating, unless a valid exemption applies. This means the MEES regulations will now apply to all existing leases even where there has been no lease renewal, extension or new lease granted.

If a substandard property is let or continues to be let in breach of MEES regulations, without a valid exemption, the landlord is at risk of penalty which could be as much as a £150,000 penalty per breach.  

Leases which are excluded include those for a term of 99 years or more, and those granted for a term not exceeding 6 months (unless the lease contains an option to renew it beyond 6 months or, at the time it is granted, the tenant has been in occupation for a continuous period of more than 12 months).

A landlord can continue to let a property that falls short of the MEES regulations without any enforcement action being taken if an exemption applies and the exemption must beregistered on the PRS Exemptions Register. The key exemptions are:

• Lack of consent – the landlord has been unable to obtain consent from a third party (tenant, local planning authority, mortgagee) to carry out the necessary energy improvement works.
• Seven-year payback test – landlords can demonstrate that the necessary improvement works will not pay for themselves via energy bill savings over seven years.
• Devaluation – this applies if the landlord has obtained a surveyors report that the installation of energy improving works would reduce the market value of the property by at least 5%.

If any of the exemptions apply, these must be registered on the PRS Exemptions Register and careful note of the expiration dates will need to be taken by the landlord and/or their managing agents as an improvement to the EPC of the property will need to be re-attempted ahead of their expiration.

If you have any questions regarding the upcoming changes, please speak to our Commercial Team on 01284 702626.