Don’t be an ‘April Fool’ and ‘MEES’ the next deadline for Energy Efficiency restrictions

It’s not an April fool, 01 April 2023 is the new date for some commercial property owners to dread.

Effective from this date, further restrictions to The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, commonly known as MEES comes into force. From 1 April 2023 landlords of sub-standard commercial properties are no longer permitted to continue to let a property that fall within EPC Bands F or G at all, unless the required energy efficiency improvements are put in place. This change reflects further tightening on 01 April 2018 restrictions on granting new leases or renewing existing tenancies of properties below EPC Band E.

Here are the stats

According to research by Estates Gazette Radius (EG), circa £2.5 Billion of rental income is under threat for properties that are currently let and will not comply with legislation from 1 April 2023. If restrictions tighten, to Band B by 2030, this could rise to £8.5 Billion.

From 1 April 2023, circa 120 million sq ft of space within 4,110 buildings will become substandard, which is equivalent to 199 Shards!  London is the largest market affected with 24.1 million sq ft of space due to become substandard in April 2023.

What happens if my building doesn’t comply?

In order to continue to let a property the property must comply with a minimum EPC band E through improvement or have an exemption registered. Fines for a breach of MEES can range from a percentage of Rateable Value up to £150,000 for larger properties.

Certain types of property can be exempt from EPC requirements including Temporary buildings, small buildings less than 50 sq m, properties that do not use heating and some industrial sites. In addition, energy improvement exemptions can be registered for example where consent is refused by a tenant for landlords to undertake improvement works.

What should I do?

Firstly, commercial property owners shouldn’t bury their head in the sand. Commercial landlords should undertake an audit of their portfolios if they haven’t done so already. Where EPCs don’t exist, these should be obtained. This should identify properties with an F or G banding and also those below Band D which is due to become the next minimum standard.

Landlords should then see whether exemptions can be registered for F and G properties via any one of the exemptions set out above.

If no exemptions can be registered, then improvements will need to be made ASAP to ensure that landlords do not suffer rental voids etc. It would be recommended that improvements are made to ensure properties meet Band D, as future exemptions may be possible as legislation evolves.

Our thoughts

Adam Smylie, Head of Valuation at Kirkby Diamond comments “For the last five years, those in the know have been aware of impending EPC restrictions. Those that have failed to prepare will be the hardest hit when restrictions on occupancy come into force. Whilst some landlords will be able to register exemptions, other landlords will be left with large improvement bills. Some landlords run the risk  of voids where they cannot let properties that become vacant and cannot afford to refurbish them. This may lead to a rise in landlords with smaller portfolios selling off substandard properties where they cannot afford to improve them”.

Mark Pepper, Head of Building Consultancy adds “Kirkby Diamond have worked alongside various clients to help implement energy performance improvements at a variety of properties. We have actively project managed larger schemes including the re-roofing and re-cladding of a 1960s industrial building where the EPC was in Band G, as well as smaller projects including refurbishment of office space which included new lighting and heating apparatus to improve the energy performance banding When carrying out refurbishment projects, improving EPC ratings has become the norm for well informed, proactive landlords.

Landlords need to be aware of these issues as improvements can have a significant impact on their balance sheets with a fairly typical energy efficiency improvement project starting at around £10,000. Larger projects that involve re-roofing can easily run into the hundreds of thousands due to rising material prices and labour shortages. Whilst this may seem like a lose lose situation for a building owner, improvement costs can however be offset by a long-term reduction in running costs or an increase in capital values”.

Kirkby Diamond is a full-service firm of chartered surveyors and property consultants. We have offices in Bedfordshire, Hertfordshire and Buckinghamshire; we work with local and national clients to offer a total solution to their surveying and commercial agency needs. For information on how we can assist you in ensuring your building is compliant with Energy Efficiency regulations please contact us.

For information on how we can assist you on ensuring your building is compliant with Energy Efficiency regulations please contact us – info@kirkbydiamond.co.uk / 01908 678 800