Be Aware of April’s Commercial Buildings Energy Efficiency Regulations

Landlords with commercial properties with an EPC energy rate of ‘F’ or lower in their portfolio need to act fast. From April 1, 2023, it will be illegal to rent these out.

On that date, the latest Minimum Energy Efficiency Standard (MEES) ruling comes into force, applying new minimum standards in England and Wales, to both continuing/existing leases and new ones.¹

This is another milestone in the drive to achieve greater energy efficiency. By 2027, a ‘C’ rating is likely to be required; by 2030, a B-rating.² The legislation aims to help achieve net-zero carbon emission targets by 2050. Currently, non-domestic building stock contributes 23% of UK built environment emissions.³

Landlords need to demonstrate they have strived to achieve the highest EPC band possible. For many, particularly those with commercial properties, this could be problematic.

It is believed thousands of commercial properties will not meet the minimum standard required by April.⁴ Any landlord continuing to rent out non-compliant property, thereafter, will be fined 10-20% of the property’s rateable value, up to £150,000, unless granted an exemption.⁵ Overall, 10% of commercial property does not currently have a rating of ‘E’ or above.⁶

To achieve the required rating, premises are likely to need a number of improvements, which could include fitting a replacement boiler, double glazing, wall or solid floor insulation or solar panels, or installing solar powered water heating. Landlords are likely to need to act upon a surveyor’s recommendations and spend significant sums upgrading the energy efficiency of their commercial portfolios.

If work has not already started, the timeframe is tight, especially over winter. Businesses should check the energy efficiency rating of their premises and assess who is responsible for paying for any required upgrades, under the terms of the lease. If renting a new property, the same checks should be carried out, to ensure business continuity will be possible. A public EPC register is available, for reference.⁷

If the E or higher EPC rating is not yet in place, businesses should ponder the implications. Will landlords have to enforce closure? Will they need to access their building, to carry out necessary improvements? If so, what will this mean for business continuity? Will it disrupt production or workflow? Will areas need to be vacated?

Businesses should also look at the bigger picture. Firstly, better energy-efficiency should keep bills down. Secondly, many businesses may be looking to work with suppliers demonstrating strong green credentials. as it will be part of their due diligence for their ESG (Environmental, Social and Governance) practices and reporting.

In short, being seen to operate from premises with an unacceptable energy rating may be more harmful than allowing your landlord the required access to carry out the upgrades, so liaise with them now and avoid further issues in the months and years to come.

¹ https://www.gov.uk/government/publications/non-domestic-private-rented-property-minimum-energy-efficiency-standard-landlord-guidance
² https://www.fladgate.com/insights/minimum-energy-efficiency-action-required
³ https://www.ukgbc.org/climate-change-2/
⁴ https://hrnews.co.uk/understanding-the-new-uk-mees-regulation-and-what-to-watch-out-for/
⁵ https://www.gordonsllp.com/mees-epc-rules-are-you-ready-for-2023/
⁶ https://www.propertynotify.co.uk/news/understanding-the-new-regulations-for-uk-minimum-energy-efficiency-standard/
⁷  https://www.gov.uk/find-energy-certificate