Anne Dobie attended the RICS CPD Day North Wales in Conwy last week as a guest speaker, and presented a seminar on the forthcoming Minimum Energy Efficiency Standard (MEES) Regulations due to come into effect on 1 April 2018.
Under the MEES Regulations, no commercial property which is required to have an Energy Performance Certificate (“EPC”) can be let for a term certain of more than 6 months, but less than 99 years, unless it’s minimum level of energy prescribed for the property (evidenced in the EPC) is Band E or above.
A Landlord granting a new lease of commercial property with an EPC rating of F & G on or after 1 April 2018, will commit an offence punishable by a penalty based on the rateable value of the property, unless an exemption has been registered by the Landlord in the PRS Exemptions Register maintained by the Secretary of State.
After 1 April 2023, landlords must not continue to let any buildings which have an EPC rating of less than E unless they have registered an exemption.
The penalty for renting out a property for a period of fewer than three months in breach of the MEES Regulations will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000. After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.
The Regulations are part of the Government’s commitment to reducing Greenhouse Gas Emissions, as the Government estimates that 18% of commercial properties hold the lowest EPC ratings of F or G.
Clearly, these Regulations will impact on the drafting of new leases, and the interpretation of existing Leases and allocation of liabilities and responsibilities for compliance.
There will also be an impact on the attractiveness of the properties for investment and lending purposes. It is possible that future Lenders and Investors will steer clear of properties which do not meet the minimum energy efficiency standard.
For advice on all aspects of commercial property leases, please contact Anne below.