To quickly refresh our minds on the topic, the MEES regulation came into force on 1 April 2018 and sets a minimum standard of ‘E’ for Energy Performance Certificates (EPCs). This means that it is unlawful for landlords to grant new leases or renew existing ones, if their buildings fall short of this standard.
Over the past year, we have been busy assisting our proactively informed clients with their portfolio management and reactively meeting the needs of clients who have found transactions being held up because of MEES related issues. In all cases we have provided professional advice where the property does not meet the standard, and where clients seek to make further improvements on already compliant units.
The draft EPC assessment is an important first step in establishing MEES compliance, especially where a client is planning to undertake EPC related improvement works. A draft EPC enables us to prepare a MEES report which is used to show clients what works are required and provides certainty for them on the likely capital cost before any works are commenced.
The MEES report also provides the client with an option to seek a temporary exemption if we can show the works meet certain criteria. Our experience of the exemption process is, however, limited and whilst we have provided advice on numerous justifiable cases, to date we have not received any formal instruction to lodge an exemption.
Before MEES came into force, there was a widely reported figure of up to 20% of commercial property stock being classed as sub-standard. Whilst our experience over the past 12 months suggests that this figure should have dropped now, we suspect there remains a raft of sub-standard property and if the Government’s wish to raise the minimum standard to a ‘D’ rating in 2025 becomes a reality, this figure will rise significantly.
The UK Green Building Council’s recent April 2019 report on Climate Change outlines the Government’s intent to set a legally binding target of net zero carbon emissions (across the whole economy, including transport), by 2050. The report specifically mentions MEES as one tool for reducing the operational energy use as it provides visible and tangible evidence of how improvements in the national building stock can be achieved and so, in conclusion, we expect the MEES effect to become far more onerous for landlords going forward.