- 21st October 2017
- Posted by: Adam
- Category: Freeman News, Views And Information
Minimum Energy Standards in The Non-Domestic Private Rental Sector
New laws are coming into force in April 2018. These new laws affect the private rental of non-domestic (commercial) buildings and units. The laws are being introduced by the Energy Act 2011 which commits the Secretary of State for Energy and Climate Change to encourage and enforce the improvement of the energy efficiency of commercial buildings in the private rental sector.
As a result of the new laws, from the 1st of April 2018 it will be unlawful to grant a new lease for commercial properties in England and Wales which do not comply with the new Minimum Energy Efficiency Standards (MEES). Furthermore, after April 2023, if the property has not been improved such that it complies fully with MEES legislation, heavy fines will be issued to the landlords of non-compliant properties.
Existing leases do not need to comply with the MEES until April 1st, 2023. However, new leases signed on or after 1st April 2018 will have to comply.
New leases or renewals must comply with MEES on or after 1st April 2018.
It is highly likely that the standard will be raised from the current Commercial EPC ‘E’ rating (MEES 2023) to a ‘D’ rating in 2025 and a ‘C’ rating in 2030. This means that landlords must act now in order that their properties are ready and able to take on board the necessary improvements and modifications to enable them to remain rent worthy. It has been estimated that up to 20% of current commercial buildings do not achieve an E Rating Commercial EPC. Rent reviews for substandard properties will likely be under severe review in April 2018, with heavy financial implications for commercial landlords and their agents.
Non-compliance penalties will be linked to the rateable value of the property, but will be as high as £150,000!
Are some property types exempt?
Yes. Properties that do not require a Commercial EPC under current rules will be exempt from MEES. This includes places of worship, farm buildings with less than four walls, buildings scheduled for demolition etc. MEES will also not apply to buildings let for less than 6 months or under long-term leases greater than 99 years.
Landlords are also able to exempt themselves from MEES regulations if they are able to demonstrate that they have carried out all cost-effective recommendations made by the assessor under the Green Deal Scheme (5-year exemption). Also, if they can prove that the recommended improvements will devalue the property by more than 5%, or if the improvements fail to raise the EPC rating above an ‘F’.
Bizarrely, if the landlord is unable to make the improvements because they are denied access by the tenant, lender or planning authority, they will be granted a 5-year exemption (unless the tenant denying the improvements vacates the property!)
Freeman Surveying is a proven expert in providing MEES advice and consultancy. If you are a landlord and you have concerns about MEES legislation and how it will affect your portfolio, get in touch for a chat.