The New EPC Requirements from April 2018 and how it Will Effect Commercial Properties…
January 16, 2018
The Commercial team here at Ryder & Dutton are already on countdown to the minimum EPC standards coming into force for commercial properties from April 1st 2018. The MEES will come into effect on 1st April 2018 for new Leases and Lease renewals where there is an EPC already. All existing leases will be trapped by the minimum standard by 1 April 2023.
They are offering useful information and advice to assist Landlord’s with getting prepared in advance of the regulations coming into play in just a few months time.
The MEES will relate to all existing Leases from 1 April 2023. From 1 April 2023 MEES will be rolled out to cover all Leases, including existing Leases but only if the property is legally required to have an EPC on the relevant date.
Commercial manager Verity Ellidge comments:- “Commercial properties currently have an energy efficiency rating that goes from A – G and F and G are the worst performing. The new regulations will introduce a minimum standard of E and that means that buildings cannot be rented out unless they meet that standard. There’s still time to make those low cost improvements to ensure that you are compliant, so why not act now before it’s too late!”
What is the minimum energy efficiency standard (MEES)?
The minimum energy efficiency standard (MEES) was introduced in March 2015 by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. The MEES Regulations originate from the Energy Act 2011 which contained the previous coalition government's package of energy efficiency policies including the Green Deal.
Why is the government introducing MEES?
The built environment has been identified by government as a major contributor to Greenhouse Gas (GHG) emissions and therefore poses a risk to the UK meeting its carbon reduction targets for 2020 and 2050. The government estimates that 18% of commercial properties hold the lowest EPC ratings of F or G. Whereas building regulations ensure that new properties meet current energy efficiency standards and the MEES will tackle the UK's older buildings.
Which commercial buildings and Leases does MEES not apply to?
Properties which are not required to have an EPC:-
1. industrial sites, workshops, non-residential agricultural buildings with a low energy demand
2. Certain listed buildings
3. Temporary properties and holidays lets
4. Buildings where the EPC is over 10 years old or where there is no EPC
5. Leases of less than 6 months (with no right of renewal)
6. Leases of over 99 years
What happens in the event of non-compliance?
The MEES Regulations will be enforced by Local Weights and Measures Authorities who will have powers to issue fixed penalties which are set by reference to the property's rateable value.
The penalty for renting out a property for less than three months in breach of the MEES Regulations will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000. After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.
Energy efficiency improvement works would need to be implemented before April 2018 so here are a few points to take into account:-
1. Don’t underestimate the importance of insulation in making properties more energy efficient. Solid wall insulation can be installed from either the inside or the outside. If the property was built after 1920 it’s likely to have cavity walls, these have a double external wall with a small gap between which can be filled with insulation.
2. EPC ratings look only at permanent improvements to the fabric of the building so long-term upgrades would be more beneficial and will help to reduce heat and energy use. For example, ways to fill the gaps to stop heat escaping through windows, doors, letterboxes and even keyholes are can be a quick fix
3. If the EPC rating is low for example ‘F’ or ‘G’ (or is at risk of becoming so) an Energy Efficiency plan should be put in place to improve the energy efficiency of the property. This should include assessing the costs and benefits of improving energy efficiency and evaluating these against options to market the property and/or to readjust the lease.
4. Energy efficiency improvements should take advantage of void periods, lease breaks and/or be included as part of the on-going maintenance
5. Landlords can look at which properties are within the scope of the MEES regulations and whether exemptions might apply,
carrying out energy assessments to check whether the EPC ratings for their properties are indeed correct.
6. Landlord’s will need to ensure that their properties comply with MEES before a lease is granted (providing a valid EPC is legally required) However, in certain circumstances the landlord will have six months after the lease is granted to comply, this usually being where the landlord has no choice whether to grant the lease.
For more information regarding this matter or if you have any concerns about how this may effect you, please contact our commercial department on 0161 925 3232.