Energy efficiency standards – landlords of commercial properties beware

Case Studies

Energy efficiency measures may have been an obvious omission from the Government’s recent Energy Security Strategy, however the clock is very much ticking for landlords to ensure their commercial properties meet minimum energy efficiency standards.

From 1st April 2023, as part of the Minimum Energy Efficiency Standards Regulations (MEES), a landlord can only lawfully continue to let a commercial property if the building has an energy rating of ‘E’ or above. Failure to comply with said regulations could lead to fines of up to £150,000.

Rajinda Sanghera of Clarke Willmott warns landlords about energy efficiency standardsRajinda Sanghera (pictured left), a commercial property specialist at the law firm Clarke Willmott explains:

“Currently, the regulations prevent a landlord from granting a new tenancy of a commercial property that has a sub-standard EPC rating of F or G. From 1 April next year the MEES Regulations will extend to all lettings of commercial property; a landlord continuing to let a sub-standard commercial property will be in breach of them.

“Fines will depend on the circumstances of the breach. They start at 10% of the rateable value up to a maximum of £5,000 and rise to 20% to a maximum of £150,000.

“On the positive side, a more energy-efficient building is likely to be more attractive to prospective tenants who will benefit from cost savings and may command higher rents.”

Ms Sanghera also highlighted the difficulties some landlords may face in ensuring compliance for existing leases:

“Existing leases remain valid, but the provisions of those leases may not permit the landlord to take any steps to improve the energy rating of the property, nor contain some of the green lease clauses seen in newer leases.

“A landlord may be able to take advantage of the exemptions contained in MEES for continuing to let a sub-standard property but, where they can, must ensure that the exemption is validly registered on the PRS Exemptions Register,” she added.

Landlords are therefore being advised to urgently review the energy efficiency standards of their properties to ensure any improvements can be made in good time prior to the deadline.

This may however only be the start of the energy efficiency journey, due to Government’s target of raising the energy performance rating to ‘B’ for non-domestic buildings by 2030, which is being viewed as a key step in achieving the country’s Net Zero ambitions.

Related

Latest in Advice & Opportunities