Energy efficiency in buildings

The Minimum Energy Efficiency Standards regime ("MEES") was brought into effect by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. Until 31 March 2023, the MEES rules required landlords granting a new lease of a commercial premises to produce an energy performance certificate ("EPC") for the property, showing a rating of E or above, unless they had registered an exemption. Landlords are prohibited from granting a new lease of commercial properties with an EPC rating of F or G.

From 1 April 2023, it became unlawful for a landlord to continue to let a commercial property with an F or G rating unless (1) they have carried out all the cost-effective energy efficiency improvements prescribed for it in its EPC, and the EPC still shows a rating of F or G, or (2) one of the exemptions applies.

        
            What are the exemptions?
        
The seven-year payback test – This applies if the cost of the improvement works necessitated by MEES are not covered within seven years by the energy savings brought about as a result of the works.

Devaluation – This exemption applies where the landlord has obtained a report from a surveyor to the effect that carrying out the recommended energy-efficiency measures would reduce the market value of the premises by 5% or more.

Third-party consent – Landlords can register this exemption if the recommended energy efficiency improvements require the consent of a third-party (such as a superior landlord or a local planning authority) and they have used reasonable efforts but have been unable to obtain the necessary consents.

6 month new owner exemption – On the purchase of a property rated F or G which is subject to existing tenancies, the purchaser can register a six-month exemption in order to carry out the energy-efficiency measures that are needed to bring the EPC rating to an E or above.

Following the Government's consultation into improving the energy performance of privately rented homes carried out in 2020, it had been anticipated that the next step in the Government's plan to achieve net zero by 2050 would be that all the minimum requirements for landlords letting dwellings would shift to C by 2027 and B by 2030. However, the Government announced on 20 September 2023 that this trajectory would no longer be pursued in relation to dwellings, but that the Government would instead continue to encourage households to upgrade their property's energy efficiency where they can, and that the Energy Efficiency Taskforce would be disbanded. The current MEES rules remain in place, but these decisions have left the real estate sector confused about the direction of travel. There was disappointment in the industry that the King's Speech in November 2023 made no reference to the MEES regime or to the proposed reform of EPC methodologies.