Minimum Energy Efficiency Standards - are you prepared?
New Rules from 1 April 2018:
If a Landlord is going to let a commercial property after 1 April 2018 (or for existing lettings after 1 April 2023), they will have to comply with the MEES Regulations. Not all commercial properties are subject to the new Regulations. The exemptions are as follows
- Properties that have an Energy Performance Certificate rating of “E” or higher
- Leases granted for less than 6 months, or more than 99 years
- Certain Listed Buildings
A Landlord will commit a criminal offence if after 1 April 2018 it grants or renews a lease of a property with an Energy Performance Certificate rating lower than E. The criminal offence will apply to commercial properties after 1 April 2023 where there is an existing lease in place.
The Government recognise that not all properties can be improved and, in some cases, Tenants or lenders may be unwilling to allow improvements to be carried out.
As such, it is possible to obtain a 5 year exemption, which must be registered on the PRS Exemption Register.
To obtain an exemption, it must be shown that:
- The works to achieve the minimum energy efficiency rating will not pay for themselves over a 7 year period
- A third party had prevented the works from taking place
- The works reduce the property’s capital/rental value by more than 5%
When buying commercial property, further consideration should be given and the Energy Performance Certificate should be scrutinised, as if works are required to improve the rating, this could increase costs significantly, or reduce the value of the investment.
It may be that the cost of any works can be met under the service charge provisions of the relevant leases. It is therefore important to make sure that any service charge provisions or repair obligations within a lease are well drafted.