The Energy Efficiency (Private Rented Sector) (England and Wales) Regulations 2015 introduced  Minimum Energy Efficient Standards (MEES) for the rating of rented non-domestic commercial premises across England and Wales.  It is now unlawful for a landlord to rent a non-domestic commercial premise with an energy performance rating below an ‘E’. A landlord is required to provide an energy performance certificate (EPC) to its potential tenant at the start of lease negotiations.

The MEES Regulations at present

Since the 1st April 2018 landlords cannot grant a new lease of their property with an EPC rating of band F or G. This also applies to the renewal of existing leases.

A landlord will need to consider the energy performance rating of their premises prior to any new lease negotiations. If the property does not have an energy performance rating of an E or above, the landlord will need to carry out the appropriate improvements works to the property. Similarly, a landlord entering negotiations for a renewal lease will need to ensure that they have a valid EPC in place which meets the current performance standards.

The landlord may be able to rely on one the MEES exemptions: –

  •       “7-year payback” exemption: where a recommended measure is not a relevant energy efficiency improvement because the expected value of savings on energy bills are less then the cost of repaying the improvement over the 7 years, starting from the date the installation is completed. This exemption will last 5 years.
  •       “All improvements made” exemption: where the relevant energy efficiency improvements for the property have been made, or if there are none that can be made, but the property remains below an EPC rating of E. This exemption will last 5 years.
  •       “Wall insulation” exemption: where a cavity wall insulation, external wall insulation or an internal wall insulation is not considered a relevant measure. The landlord must obtain expert written advice indicating that the measure would have a potential negative impact on the fabric or structure of the property. This exemption will last 5 years.
  •       “Consent” exemption: where a landlord needs a third-party consent to carry out the improvement works, and the consent was refused or granted with a condition that the landlord was not reasonably able to comply with. This exemption will last 5 years.
  •       “Devaluation” exemption: where a landlord has obtained a report from and independent surveyor who is on the Royal Institution of Chartered Surveyors register of valuers advising that the installation of specific energy efficiency measures would reduce the market value of the property by more then 5%. This exemption will last 5 years.
  •       “New landlord” exemption: this exemption will apply in the following circumstances: –

o the grant of a lease is due to a contractual obligation; o

o where the tenant becomes insolvent, and the landlord has been the tenant’s guarantor;

o the landlord has been guarantor, or a former tenant, who has exercised the right to obtain an overriding lease of a property under section 19 of the Landlord and Tenant (Covenants) Act 1995;

o a new lease has been deemed created by operation of law;

o a new lease has been granted under Part 2 of the Landlord and Tenant Act 1954;

o a new lease has been granted by a court order, other than under Part 2 of the Landlord and Tenant Act 1954; and

o   a person becomes the landlord on purchasing an interest in a property and, on the date of the purchase, it was let on an existing tenancy.

This exemption will last for 6 months from the date the new landlord became the landlord.

A reliance on these exemptions will need to be registered against the property.

The landlord faces the following penalties if they let a property in breach of MEES: –

  •       breach of less than 3 months – financial penalty of 10% of the rateable value of the property, subject to a minimum of £5,000.00 and a maximum of £50,000.00;
  •       breach for more than 3 months – financial penalty of 20% of the rateable value of the property, subject to a minimum of £10,000.00 and a maximum of £150,000.00;
  •       registering false or misleading information on the exemptions register – fine of up to £5,000.00;
  •       failure to comply with a compliance notice – fine of up to £5,000.00; and
  •       there is also an additional publication penalty which could result in a fine up to £150,000.00 per property per breach.

The future of MEES

From the 1st April 2023 the MEES regulations will apply to all existing commercial leases. Landlords will need to act quickly to ensure that their property has an EPC rating of an ‘E’ so as to avoid any penalties. Landlords with a large commercial property portfolio will need to consider these changes carefully and ensure that any improvements are carried out swiftly.  

Landlords should also take into consideration how to protect their EPC rating when a tenant is carrying out any works or alterations to the property which may result in the rating being affected. An energy performance rating ‘E’ or above must be maintained throughout the lease term.

Talk to our friendly commercial property team today about how we can help you with the above – Tel: (01782) 646320, or email Richard@rjssolicitors.com, Carladawn@rjssolicitors.com or Lauren@rjssolicitors.com.