Changes to Energy Efficiency Minimum Standards from 1 April 2023

1 April 2023 is a crucial date for landlords who let commercial property. It is the date under the Minimum Energy Efficiency Standard Regulations (MEES Regulations), that all relevant leased commercial property must have an Energy Performance Certificate (EPC) rating of an ‘E’ or higher.

The position since 1 April 2018 has been that a landlord of sub-standard commercial property, i.e. with an EPC rating below ‘E’, must not grant a new lease of that property, unless an exemption applies to them. However, from 1 April 2023, a landlord of a sub-standard commercial property must not continue to let that property, unless an exemption applies to them. This applies regardless of when the lease was granted.

There are exemptions available to landlords under the MEES Regulations, for example, where the ability to carry out improvements is prevented by third parties or where improvement works would devalue the property by 5% or more and a temporary six-month exemption for landlords purchasing a sub-standard commercial property. Exemptions need to be validly registered by the landlord on the Private Rented Sector (PRS) Exemption Register and supporting evidence will be required to register the exemption.

Liability under the MEES Regulations will not affect the validity of the lease itself but the landlord may be liable for a financial penalty of up to £150,000.

Crucially, the MEES Regulations do not apply where the landlord is not required to have an EPC. A different set of EPC Regulations specify when an EPC is required. A common misconception under those regulations is that all listed buildings are exempt from the requirement to have an EPC, which is not the case.  Specialist advice should be sought on whether an EPC is required, to avoid obtaining an EPC when not strictly required and accidentally triggering liability for the landlord under the MEES Regulations.

The latest changes are part of a bigger package of measures, and it is proposed that by 1 April 2027 the minimum EPC rating will be ‘C’ or higher and by 1 April 2030 the minimum EPC rating will be ‘B’ or higher, these measures are intended to apply to all new and existing leased commercial property. As such, specialist advice should be sought on EPC improvement strategies and please do not hesitate to contact us if you would like us to put you in touch with the relevant professionals.