Further to the establishment of the Minimum Energy Efficiency Standards (MEES) Regulations in 2015, Energy Performance Certificates (EPC) are becoming an increasingly important consideration for non-domestic building owners as the requirements slowly shift the baseline standard towards the Government’s goal for all buildings to have an EPC rating of ‘B’ or above by 2030.
Reaching this objective means non-compliant buildings undergoing a gradual shift to improve energy ratings in accordance with the Government’s staged approach. The MEES Regulations provide this timeline of which the first critical date for commercial properties was on 1 April 2018. From this date, it became unlawful to “grant” a new tenancy of a sub-standard domestic property (buildings with an Energy Performance Certificate below band ‘E’).
Another key point in this timeline was reached on 1 April 2023, when it became unlawful for a landlord to“continue to let” a sub-standard non-domestic property. This will be especially relevant to landlords who granted tenancies prior to 1 April 2018, as any properties let after this date should already be compliant. Naturally, if a previously compliant building has fallen to a sub-standard energy rating, the landlord must remedy this in accordance with the MEES Regulations.
Due to the significant penalties for non-compliance, commercial property owners that let sub-standard property must consider their position carefully, especially as they may qualify for one of the exemptions set out in the MEES Regulations. Valid exemptions include (but are not limited to):
- No further relevant improvements. Where a landlord has made all the “relevant energy efficiency improvements” for the property, or where there are no relevant energy efficiency improvements that can be made.
- Inability to obtain consent. Where a landlord has not been able to obtain the consent of the tenant or a third party to carry out the works.
- Devaluing effects. Where the landlord has not increased the energy performance indicator for the building because the making of that improvement would damage the property or devalue the property by 5% or more.
- New landlord. A new landlord is able to use a temporary exemption, giving them 6 months from the acquisition to comply with minimum standards. This temporary exemption also allows landlords 6 months to comply in other exceptional circumstances.
Crucially, the above exemptions do not apply automatically and a landlord seeking to rely on one must register it on the PRS Exemptions Register before the tenancy is entered into. An exemption will only be valid for 5 years and cannot be transferred to an incoming landlord on the sale of the property.
A landlord who is in breach is liable to a civil penalty including financial penalties which can be imposed to an amount not exceeding £150,000.
Further guidance on the relevant exemptions can be found here: https://www.gov.uk/government/publications/private-rented-sector-minimum-energy-efficiency-standard-exemptions/guidance-on-prs-exemptions-and-exemptions-register-evidence-requirements
If you would like any further information on these changes and how this may affect your property, please contact Jordan McMullan at CBG Law: E: jcm@cbglaw.co.uk