Prime Minister Rishi Sunak relaxes Net Zero initiatives affecting property owners and business

A relaxation of the government’s Net Zero initiatives was announced by Prime Minister Rishi Sunak on 20 September 2023.

Of the changes to be implemented the key areas affecting property owners and businesses are highlighted below.

1. Commercial properties – Since 1 April 2018, Landlords have only been able to grant a new tenancy of a property with a minimum energy efficiency standard (MEES) rating of ‘E’. As from 1 April 2023, this requirement applies to both new and existing tenancies.

Prior to the announcement the following phased improvement to energy efficiency of commercial buildings within the scope of MEES was expected:

• 1 April 2025 – landlords of all commercial rented buildings must present their current Energy Performance Certificate (EPC) and if it has a rating of less than C undertake improvement works.
• 1 April 2027 – all commercial rented buildings must have an energy efficiency rating of at least ‘C’ rising from the current requirement of “E” in order to let or continue to let a building.
• 1 April 2028 – landlords of all commercial rented buildings must again present their current EPC and if it has a rating of less than B undertake improvement works.
• 1 April 2030 – all commercial rented buildings must have an energy efficiency rating of at least ‘B’ in order to be let or continue to be let.

Changes announced: All current requirements in place in respect of the MEES regulations remain in effect. It is though unclear at this stage whether the government intend to scrap the proposed upgrades to be required of landlords in improving the energy efficiency of their properties in the future. Clarification of the government’s position on this is awaited.  

2. Residential properties – Since 1 April 2018 the MEES regulations have also applied to lettings of residential properties, requiring that a property to be let must have a minimum energy rating of ‘E’. From 1 April 2020, that requirement has also applied to existing tenancies.

Prior to the announcement the following phased improvement to the energy efficiency of residential properties was expected:

• Raising the energy performance standard for properties within the scope of MEES regulations to an energy rating of ‘C’.
• Applying the requirement of a ‘C’ rating to new tenancies granted from 2025 and then to existing tenancies from 2028.
• Increasing to £10,000 the maximum amount landlords of sub-standard property are required to invest to improve the energy performance of their properties.

Changes announced: All current requirements in place in respect of the MEES regulations remain in effect. However, the proposed upgrades to be required of landlords in improving the energy efficiency of their properties in the future have been abandoned until further announcement.

3. Commercial and residential properties – Prior to the announcement it was proposed that all boilers needing replacement would have to switch to a heat pump system from 2035. While the installation of oil and LPG boilers for off-gas grid homes were to be phased out from 2026. To help the transition the Boiler Upgrade Scheme introduced by government provided grants of between £5,000 – £6,000 (depending on the system) for qualifying owners of property when upgrading to a heat pump system.

Changes announced: Qualifying households will be able to apply for an exemption to the requirement to switch to a heat pump system when replacing a fossil fuel boiler. It is expected that this will apply to those that will find it most difficult to transition.

The ban on oil and LPG boilers from 2026 has been delayed until 2035 for off-gas grid homes.

Grants available pursuant to the Boiler Upgrade Scheme are to be increased up to £7,500 to assist with the transition to a low-carbon alternative heating system.

Further detail is awaited following the announcement. Property owners and business will need to continue to be alive to the evolving situation especially as it may change again depending on the outcome of the next General Election. In the meantime the existing requirements of MEES should not be overlooked and you should consider:

• Do the regulations apply to my property?
• If the regulations do apply, have I taken all necessary steps and implemented all required improvements?
• Do I qualify for an exemption?
• What are the penalties of failing to comply with the regulations?
• Am I eligible for a grant?
• What are the likely costs of making improvements and do any caps apply to the amount required to be spent?

To help answer your queries and advise on the changes in the law please get in touch.