The Minimum Energy Efficiency Standards For Commercial Buildings
If you own a commercial property in the UK, or if you’re a landlord, a tenant, an investor, a developer or a lender, you might have come across the term MEES. This is possibly in relation with the property you are interested or involved in and whether it is compliant to current energy efficiency standards.
If you are not clear on the new energy regulations, you could be risking non-compliance which may lead to costly penalties. That expense, in addition to upgrade costs can be a substantial amount you may not be ready to shell out. Plus, the inability to lease the property also means potential loss of income.
In order for you to avoid any complications, it will be useful to learn more about the latest set of rules. Conferring with experts that specialise on energy efficiency and sustainability consultancy can also help you have a clearer understanding of your property’s MEES standing.
To give you a quick guide on this topic, here are some points that address frequently asked questions.
MEES stands for “Minimum Energy Efficiency Standards” which was set out to encourage property owners and landlords to increase the energy efficiency of their buildings located in England and Wales. According to the new regulations, the minimum standard a commercial (non-domestic) property needs to have is an Energy Performance Certificate (EPC) rating of E.
In detail, the minimum level of energy efficiency regulations state that, subject to certain requirements and exemptions:
Effective 1 April 2018, landlords of non-domestic private rented properties (including public sector landlords) may not grant a tenancy to new or existing tenants if their property has an EPC rating of band F or G
Effective 1 April 2023, landlords must not continue letting a non-domestic property which is already let if that property has an EPC rating of band F or G.
Why are these regulations enforced by the government?
The energy consumed by non-domestic buildings accounts for around 12% of the UK carbon emissions. This means that there is a remarkably high potential to reduce the country’s overall carbon emissions by regulating energy efficiency in the commercial sector through driving up the performance of commercial buildings.
Existing properties that are low-performing not only contribute to carbon emissions, but also waste energy. By implementing these minimum standards, property owners will be encouraged to improve the energy performance of existing buildings which is essential to reduce emissions.
The improvement in energy efficiency is also seen as a way to better address energy demand, increase energy security as well as support the growth of the green construction industry. Increased demand for energy efficient methods and processes will bring out more industry players, which will potentially lower the cost of green products.
Are all commercial buildings covered by MEES?
MEES is applicable to commercial buildings that are legally required to have an EPC. This includes individual properties that may be housed within larger buildings as they are required to have their own individual EPC.
However, there are exclusions as the MEES regulations do not apply to:
Commercial buildings which are not required to have an EPC such as workshops, industrial sites, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties and holiday lets.
Buildings where there is no EPC or it is over 10 years old.
Tenancies of less than 6 months (with no right of renewal).
Tenancies of over 99 years.
Are there any MEES exemptions?
If your commercial property does not fall under the specified exclusions, your building may still be exempted from MEES. Here are some cases where exemptions for non-domestic properties may apply.
‘7 Year Payback’ Exemption
‘All Improvements Made’ Exemption
‘7 Year Payback’ Exemption
If you can show that the cost of purchasing or installing energy improvements does not meet the ‘7 year payback’ test.
Failing to meet the 7 year payback test means that the expected value on energy bills that the upgrade is expected to achieve over a period of 7 years is less than the cost of paying for the upgrade.
If you want to apply for this exemption, you would need to upload 3 quotations for the costs of the energy improvements as well as the calculations made to arrive at these costs.
‘All Improvements Made’ Exemption
If you have already made all the recommended energy efficiency upgrades and the property’s rating still remains below EPC E, then the requirement does not apply.
In cases where third-party consent is legally required, such as from a local authority, a current tenant, or other third-parties, and the third-party refuse to provide consent, you may be eligible to apply for exemption.
If an independent surveyor reports that undertaking the recommended energy efficiency improvements would reduce the market value of your property by more than 5%, an exemption from meeting MEES will apply.
However, all these exemptions are only valid for 5 years so you must try again to improve the property’s efficiency once the exemption expires.
Is there any penalty if I do not comply with MEES?
If you do not comply with MEES, you may face financial penalties that will depend on the type of your property and the length of the breach. For commercial properties, the fines are significantly higher than for residential properties. The penalty can reach to a maximum of £150,000 per occasion and are based on the rateable value of the property.
How do I know if I need to upgrade my property?
If you are selling, leasing or modifying your property, you may need to acquire a new EPC which should meet the minimum EPC of E rating.
If your existing property has an EPC rating of F or G, you would need to implement relevant energy efficiency measures in order for you to improve this rating to at least an EPC E rating.
If your EPC rating is already an E, you should not be complacent because according to 2017 research, thousands of commercial properties having a compliant EPC E rating could have an actual rating lower than currently recorded. This puts property owners at immediate risk of breaching guidelines when a new EPC is required.
What do I need to do to ensure my property is compliant?
You should be aware of what your property’s EPC rating is. You can determine your EPC rating by reaching out to experts who can carry out a professional energy assessment and produce an Energy Performance Certificate for your property. Having specialists perform the evaluation can provide you with appropriate recommendations on how to improve your building’s energy efficiency and ensure your property portfolio complies with the MEES legislation.
If you want to learn more about MEES regulations and how it could impact your property, Contact Barker Associates today.