Minimum Energy Efficiency Standards, usually called MEES, apply to many privately rented commercial properties in England and Wales. In essence, if a property has an EPC rating below E, landlords will usually need to carry out works to improve the rating before it can be let, unless a valid exemption has been registered.
For landlords, an EPC is more than just a document to file away. It can:
- affect whether the property can be let or financed
- create unnecessary delays on transactions; and
- expose you to the risk of enforcement action.
When do MEES apply?
MEES will usually be relevant where a commercial property needs an EPC and is being let on a qualifying tenancy. In practice, many commercial properties that have been sold, let or altered in recent years are likely to fall within the rules.
There are some exceptions, such as certain very short lettings and very long leases of 99 years or more
What if the EPC is F or G?
If the property is caught by MEES and has an EPC rating of F or G, the landlord should look at what improvements could reasonably be carried out to bring it up to at least an E rating. However, the Government is likely to require higher ratings in the near future to satisfy its net zero targets.
If improvement works are not practical or do not make financial sense, an exemption may be available. One example is the 7-year payback test, which looks at whether the expected energy savings over 7 years are less than the cost of the works.
Common exemptions
An example of where an exemption may be available include:
- improvement works fail the 7-year payback test;
- all relevant improvements have been made but the property is still below E;
- third-party consent is needed but cannot be obtained;
- expert evidence shows certain works would damage the property; or
- an independent surveyor confirms the works would reduce the property’s value by more than 5%.
- for a listed building, where improvement works would demonstrably harm its historic features.
Most exemptions last for 5 years, although some temporary exemptions are shorter.
Why registration matters
It is not enough simply to believe that an exemption applies. The exemption must be properly registered on the PRS Exemptions Register and supported by evidence, such as quotes, calculations, expert reports or correspondence showing that consent was refused.
It is also worth remembering that exemptions may not automatically transfer to a new owner, so this should be checked early in any sale or purchase.
Enforcement risk
Local authorities can ask for documents and investigate possible breaches. The main risk is where a landlord lets, or continues to let, a sub-standard property without a valid exemption in place.
Penalties range from £1,000 for a breach in the domestic property rules to £150,000 for commercial properties, depending on the circumstances.
What may change next?
For now, the minimum standard remains EPC E where MEES apply. However, the Government has indicated that larger privately rented commercial buildings over 1,000 square metres may need to reach EPC B by 2031, where this is cost-effective, once further legislation is passed.
That means it is sensible for landlords to keep MEES under review and plan ahead, particularly where a property is larger or currently has a lower EPC rating.
Key takeaway
The best time to think about MEES is early, whether you are dealing with a new letting, lease renewal, sale or refinance. Checking the EPC, any planned works and any exemption evidence in good time can help avoid delays later.
Need advice?
If you are dealing with a commercial property affected by MEES, it is worth taking advice before you proceed. The right approach will depend on the EPC, the lease terms, the recommended works and whether an exemption can properly be relied on.