Issues with the new MEES regulations
Minimum Energy Efficiency Standards (MEES) regulations for commercial premises came into force in April 2018, aimed at pushing property owners and landlords to make their premises more energy efficient. They are an extension to 2008’s regulatory system that introduced Energy Performance Certificates, and it is now illegal to let any commercial premises with a rating of F or G.
Buildings that are exempt from EPCs are not affected, and the MEES regulations are not meant for listed buildings and temporary structures. However, the exemption must be claimed by registering it with PRS exemptions and providing the necessary evidence that a property qualifies for the exemption.
Compliance is enforced by local authorities, which can impose civil penalties that revolve around a property’s rateable value. Fines range between £5,000 and £150,000, and if anyone provides false information they will get an additional £5,000 fine and placed on a ‘naming and shaming’ register.
What have we seen so far?
The extra regulations have hit some property owners hard. Audits and the management of additional regulations have incurred high costs and some landlords have been unable to let properties that were otherwise market-ready. Even some tenants have been left with uncertainty as landlords rush to achieve compliance. And there are some practical difficulties with this enforced energy management too.
Listed buildings have been exempt from the EPC rules, and therefore MEES regulations don’t apply either. But the EPC exemption only applies if it might “unacceptably” change the property’s “character or appearance” in order to improve its energy efficiency.
How does one prove that the alterations would be “unacceptable”? One way is to obtain an EPC, then show the local authority what works would need to be carried out. If they conclude that those works would “unacceptably alter the building’s appearance” then you have proved exemption from MEES and EPC.
Alternatively, you could talk to a local authority conservation officer for advice. This might, however, turn out to be more complicated than just obtaining an EPC up front.
When a lease expires, substantial works may be required to make a property MEES compliant before a building can be re-let. These costs will often be covered by the existing tenant, but this may not be the case if works are simply to achieve MEES compliance. If the refurbishment works are very substantial, they may supersede a dilapidations claim.
Avoid this by dealing with as much as you can before the lease expires, working with the tenant. This could be challenging, but it is worthwhile.
The full impact of MEES will be learnt over time. Market leaders were well prepared for it, but some landlords and tenants are struggling to keep up. Next year will be an interesting time as the fines begin to hit and the market settles into the new regulations.