The Minimum Energy Efficiency Standards (MEES) Regulations come into force on 1 April 2018 – making it illegal to grant a new tenancy to new or existing tenants for privately rented commercial properties that fail to meet minimum energy standards.
From April 2023, MEES will apply to non-domestic properties where a lease is already in place and the property occupied. This applies even where there has been no tenancy renewal or extension, or new tenancy.
Any landlord flouting the new regulations will be subject to a fine of between £5,000 and £150,000.
MEES: key requirements
To comply with MEES, landlords must achieve an Energy Performance Certificate (EPC) rating of E or above (EPCs rate a property's energy efficiency on a scale from the most efficient A+ to least efficient G). Any buildings that fall below an E-rating will be referred to as 'sub-standard property'.
MEES applies to sub-leases, affecting occupiers or managed office providers who sub-let property and will be treated as the main landlord.
Properties with an EPC rating below E can still be marketed after April 2018, but the prospective landlord and tenant must agree to a package of energy efficiency measures to achieve compliance prior to the lease being granted. It is currently unclear whether landlords will be able to recharge the cost of energy efficiency improvements to tenants.
MEES will apply to England and Wales, while Scotland is subject to similar regulation. It is being introduced to shake up energy performance of non-domestic buildings, which account for 12% of the UK's greenhouse gas emissions.
The risks of non-compliance
It is estimated that up to 20% of all non-domestic buildings in England and Wales could have the least efficient F or G EPC ratings, and that 19% have an E-rating, placing many building owners within scope of MEES.
Building owners who fail to comply with MEES face the obvious risk of financial penalties, but there's also the risk of being saddled with a commercial building that it's illegal to let, and the associated reputational damage. Tenants could also be forced to seek new premises.
Energy performance is likely to become more important in determining rental levels and sale values, and become a major part of the selection and due diligence process for potential tenants and purchasers. It will also affect the valuation of properties.
- Buildings not required to have an EPC, e.g. places of worship
- Leases of less than 6 months, but subject to a maximum of two consecutive leases with the same tenant
- Leases of more than 99 years
- Buildings where there would be no consent to carry out energy efficiency improvements
- Where the energy efficiency improvements would cause a material net decrease in the property value
- Where improvements wouldn't be able to pay for themselves within 7 years, or where all feasible work has been undertaken, but the property still remains rated below E.
Three steps to prepare for MEES
1. Identify which properties in your portfolio have an EPC and find out if they meet the minimum rating.
2. Identify what improvements are required. It would be advisable to re-examine existing EPCs in light of stricter modern standards
3. Carry out improvements, if required.
About Richard Smith
Richard Smith is the Director of Business Strategy at Inprova Energy, where he leads energy and water management services across the private and public sectors.
His career in the energy management, building controls and FM sectors spans more than 25 years, including senior roles at Mitie, Veolia, Honeywell and Balfour Beatty.
Inprova Energy is one of the UK's top ten business energy procurement and management consultancies – specialising in energy and water auditing and management, business energy purchasing and analysis, carbon reduction and reporting, and legislative compliance. Its chartered advisers are qualified ESOS Lead Assessors, and certified to deliver Carbon Trust Standard, ISO 50001 and carbon footprint measurement services.