Energy Performance Certificates (EPCs) have been a part of life for both residential and commercial property owners for more than 15 years now. Starting in 2018 commercial buildings were compelled to achieve a Minimum Energy Efficiency Standard (MEES) rating of at least “E” before a new or renewal lease could be granted, with existing leases exempting commercial landlords from having to comply. But requirements for EPCs and commercial properties have now changed.
As of April 2023, existing leases will no longer earn an exemption for landlords, meaning that property owners with existing leaseholders must now bring their buildings up to MEES standards (if they haven't already) just as if they were signing a new lease or a lease renewal. Penalties for failing to comply range from £5,000 to £150,000.
In April 2018 the UK government passed legislation mandating that all commercial properties must meet Minimum Energy Efficiency Standards - commonly referred to as MEES standards - of at least E before landlords could sign a new or renewal lease on a given property. As a result, any commercial building with an “F” or “G” rating could not be let until the building’s MEES rating was raised to E.
It was understood at the time the MEES standard was introduced that 5 years hence the same standards would apply to buildings with existing leaseholders. The idea was to grant commercial landlords with leases signed prior to the advent of MEES regulations time to bring their buildings up to speed. That 5 year grace period has now expired. Any commercial landlord who continues to let property rated F or G will now be in active violation of government regulations and subject to significant penalties.
All commercial property owners must now provide new, renewal and existing leaseholders with an Energy Performance Certificate (EPC) that certifies the building to be let has a MEES rating of at least E. A landlord is considered in breach of this requirement if the building in question has an F or G rating, or they fail to present a leaseholder or potential leaseholder with an EPC.
If the landlord is in breach of these regulations for less than 3 months at the time the violation is noted they may be subjected to a fine of up to £5,000, or up to 10% of the property’s rateable value, whichever is greater. (Rateable value being the annual amount a property would likely earn in rent on the open market as determined by the Valuation Office Agency.) Should 10% of the rateable value be more than £5,000 the maximum penalty that could be assessed in such a case would be £50,000.
If the landlord has been in breach of regulations for more than 3 months at the time the violation is noted, potential fines increase significantly with the ceiling on the minimum penalty raised from £5,000 to £10,000 and the ceiling on the rateable valuation penalty raised from £50,000 to £150,000.
A building may also be exempt if bringing it up to code would lead to a loss of market value on the property, if the landlord is unable to get tenant consent to perform necessary improvements, or if all possible improvements were carried out but failed to yield a bump in the EPC rating.
With the expiration of the grace period for landlords with existing leaseholders upon us we recommend commercial property owners take the following steps to ensure they are in compliance with MEES standards:
The landscape regarding EPCs and commercial properties has shifted once again. If you own a building that was previously exempt from MEES standards due to an existing lease, chances are it no longer is.
Contact Energy Performance Certificates today to arrange for an EPC survey and set yourself on the road to compliance. Book a survey today by calling 0203 397 8220 or by completing our online form.
