Commercial Properties Need To Meet Energy Efficiency Regulations

Commercial Properties Must Meet Energy Efficiency RegulationsUK landlords are facing a race against time to ensure their properties meet the incoming efficiency regulations that could result in substantial fines.

The New MEES RegulationsThe new minimum energy efficiency standards, The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (MEES), have recently passed and came into force from 1st April 2016.

Government estimates suggest that changes to energy efficiency requirements will impact around 360,000 properties in the private rented sector, which currently have an F or G energy performance certificate (EPC) rating.

Potential Penalties: Landlords could face fines of up to £150,000 if they do not act quickly to comply.

European Commission SupportThe European Commission has confirmed its support for new energy efficiency targets for buildings beyond 2020. This support is likely to be replicated by the UK government after the general election, irrespective of which party holds power.

Key Implementation Timeline1st April 2018: The MEES came into full force, requiring landlords of privately rented commercial properties in England and Wales to achieve energy performance of their buildings of at least an E EPC rating upon the granting of a new lease.

Similar standards for residential properties have also been introduced under the Regulations.

Penalty Structure for Commercial PropertiesLandlords of commercial properties may face substantial financial penalties:

• Short-term breaches (under 3 months): Up to £50,000
• Long-term breaches (over 3 months): Maximum of £150,000
• Residential properties: Maximum penalty of £5,000

Additional ConsequencesReputational Risk: Local authorities have the power to publish information regarding non-compliance, which could bring significant reputational risks for commercial landlords.

Public Naming: Non-compliant landlords may find their details published on public registers, affecting their business reputation and future letting prospects.

Impact on TenantsExisting Tenants: Those with existing leases need to be aware of any energy efficiency improvement works and expenditure that the landlord may be planning to meet MEES obligations.

Prospective Tenants: Those considering new lettings of property with low EPC ratings (especially below an 'E') should understand potential disruption and costs.

Improvement Works: Many landlords may be considering a programme of works now to ensure properties can be re-let or continue to be let after the deadlines imposed under MEES.

Lease ConsiderationsFor Landlords:

• Review existing lease provisions
• Consider strategy for MEES compliance
• Plan improvement works in advance
• Budget for necessary upgrades

For Tenants:

• Ensure you don't suffer disruption from landlord's works
• Avoid paying for your landlord's energy efficiency improvements
• Check precise wording of lease provisions
• Understand your rights during improvement works

Exemptions and ReliefsSome properties may be exempt or eligible for relief:

• Listed buildings where improvements would alter character
• Properties where improvements are not cost-effective
• Buildings where consent cannot be obtained
• Temporary lets (under certain conditions)

Next Steps for Property Owners

1. Assess your portfolio: Check EPC ratings of all commercial properties
2. Plan improvements: Identify properties needing upgrades
3. Budget accordingly: Factor in costs for compliance works
4. Review leases: Ensure lease terms support compliance strategy
5. Seek professional advice: Get expert guidance on compliance requirements

Commercial Property Legal SupportThe regulations are complex and non-compliance carries serious financial and reputational risks. For expert advice on MEES compliance, lease negotiations, or commercial property law matters, contact our experienced team on: 0116 2999 199 or email us at: info@d-w-s.co.uk