Pearl Wright
Commercial Property
An update on EPC Regulations (otherwise known as MEES) from 20th September 2023
As you may recall, the Minimum Energy Efficiency Standards (MEES) came into force on 1st April 2018 to encourage landlords to improve the energy efficiency ratings of their properties.
Background
These regulations prevented landlords of both domestic and non-domestic property from granting a new tenancy without a minimum energy rating of E (unless exempt).
In addition, since 1st April 2023, landlords have been prohibited from continuing to let domestic and non-domestic property which is already let if that property does not have a minimum energy rating of E (unless an exemption applies).
What happened next?
In 2021, the Government published draft proposals to again improve the energy performance of both domestic and non-domestic properties. These proposals formed part of the wider aim to bring the UK to net zero by 2050.
These new proposals suggested a two stage approach as follows:
- From 1st April 2027, all non-domestic rented properties would be required to have a minimum EPC rating of C (or register a valid exemption); and
- From 1st April 2030, all non-domestic rented properties would be required to have been further improved to have a minimum EPC rating of B (or register a valid exemption).
Earlier deadlines (of 1st April 2025 and 1st April 2028 respectively) were also proposed for domestic property.
What has happened now?
On 20th September 2023, Rishi Sunak confirmed that the 2021 proposals have been scrapped, using the following reasoning:
“…under current plans, some property owners would’ve been forced to make expensive upgrades in just two years’ time. For a semi-detached house in Salisbury, you could be looking at a bill of £8,000. And even if you’re only renting, you’ll more than likely see some of that passed on in higher rents. That’s just wrong. So those plans will be scrapped…”
This has been mostly welcome news to those landlords that had anticipated costly improvements but somewhat frustrating to those that had already paid for expensive upgrades.
Where does that leave us?
Unfortunately we are yet to receive a clear alternative plan. This leaves both tenants and landlords in a state of uncertainty. In order to meet the net zero target of 2050, further changes are inevitable. However for now, we will have to watch this space.
Sophie Williamson, a specialist in Commercial Property law, said:
“Given the current uncertainty surrounding future proposals for EPC regulations, it is important for both tenants and landlords to review the current EPC rating of their properties and ask themselves how they would be impacted if the minimum energy rating of E was improved (for example, to a B or C rating). In particular, does their lease allow the landlord to enter the property to carry out these improvements? If so, what protection is given to the tenant to prevent significant disruption to their business? In addition, can the landlord pass on these costs to the tenant? If you are a landlord or tenant and you’d like advice on interpreting the contents of your lease, please contact our Commercial Property Department for assistance.”