Changes to MEES Regulations for commercial property

The MEES Regulations for commercial property aim to help meet the Government’s net zero emissions target by 2050. Established by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, significant changes came into force on 1 April 2023.

What are MEES?

The MEES regulations require properties to meet minimum energy efficiency standards before selling or letting. An Energy Performance Certificate (EPC) rates a property’s energy efficiency from A (the most efficient) to G (the least efficient). Before 1 April 2023, MEES required landlords granting a new lease of commercial premises to hold an EPC rating of E or above. That was unless they had a valid exemption.

What are the changes to MEES?

From 1 April 2023, the ban on letting commercial property with an EPC rating below E applies to both new and existing leases. That is unless the landlord registers a valid exemption.

Penalties for non-compliance with MEES

A non-compliant landlord risks financial penalties and publication on a public register of non-compliance. The financial penalties are:

• For under three months of non-compliance: up to 10% of the property’s rateable value capped at £50,000.
• For three months or more of non-compliance: up to 20% of the property’s rateable value capped at £150,000.

Other factors landlords must consider are:

• the adverse impact on the property’s marketability;
• the cost of capital expenditure on improvement works;
• their inability to let substandard property.

What are the MEES exemptions?

Exemptions are not automatic, and a landlord must register an exemption on the Private Rented Sector (PRS) Register. The exemptions are:

• where a tenant has refused consent within the last five years for the landlord to carry out relevant improvements;
• if the necessary work requires another party’s consent (eg the local authority) and they have refused consent in the last five years;
• where a third party has imposed a condition for the work with which the landlord cannot reasonably comply;
• where an independent surveyor states that the necessary improvements will result in a reduction in the property’s market value by 5% or more;
• when the landlord has carried out all cost-effective improvements but the EPC rating remains below E;
• where the cost of the improvement works will not pay for itself over seven years (excluding VAT).

An exemption lasts for five years. However, it’s important to note that the exemption is personal to the landlord. So, if the landlord sells up during the five years, the new owner must re-register for the exemption.

In addition, a temporary exemption of six months applies for new landlords, allowing them time to comply.

Future changes to MEES

The latest changes to MEES represent just one of several ever-tightening phases. By 2030, the minimum EPC rating will be B, with an interim target of C by 2027.

Research last year revealed that in London, around 10% of office space had an EPC rating of F or G. But more worryingly for landlords, a whopping 80% of London’s office space rates C or below, a figure likely to be reflected elsewhere.