What are the exemptions to MEES commercial landlords need to be aware of?

The Minimum Energy Efficiency Standards (MEES) was brought in to force by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. MEES was introduced in various stages and from the 1st April 2018 all commercial properties being let were required to have a minimum energy efficiency standard EPC rating of E or above to be lawfully let.

However, from the 1st April 2023 you cannot continue to let a commercial property where an EPC is in place and the rating is lower than an E. This means that landlords have to actively ensure that their properties meet MEES rather than waiting until a lease is renewed.

This is something which some landlords are already alive to, as are many tenants who try to negotiate the terms of any new lease to ensure that they are not left paying for works that the landlord has to carry out in order to meet MEES requirements.

There are certain exemptions which can be utilised for commercial buildings and a landlord should consider if any of them might apply.

The exemptions are as follows:

No relevant improvements

There are no relevant energy efficiency improvements that can be made to the property or all relevant energy efficiency improvements have been made. For the purposes of this exemption an improvement will be relevant if the savings on energy bills it produces for the property, over no more than 7 years, is equal to or greater than the cost of the improvement works.

Inability to obtain consent “consent exemption”

If despite reasonable efforts, within the preceding 5 years the landlord has been unable to obtain the consent of the tenant or a third party (e.g. superior landlord, mortgagee, planning authority) to the making of the relevant improvements.

Devaluation

An independent surveyor’s report within the preceding 5 years states that any relevant energy efficiency improvement would result in a reduction of more than 5% of the market value of the property or the building of which it forms part.

Temporary exemptions

A temporary 6 month exemption is available where a landlord is renewing a lease pursuant to part 2 of the Landlord & Tenant Act 1954 and certain other limited circumstances such as where a lease is granted pursuant to a court order. It is also available where a landlord is acquiring a substandard property after 1 April 2023 that is already let.

It is important to note if they do apply, an exemption has to be registered in a central PRS Exemptions register to be valid. This requires the landlord to take active steps to ensure they are compliant with the Regulations. The exemptions will only be valid for a maximum of 5 years save for the consent exemption which will only be valid until the existing lease expires, is assigned or terminated. The exemptions are therefore only temporary fixes and do not free the landlord from all responsibility from actively managing their properties.

If a landlord is considering utilising the consent exemption they need to think carefully as to whether the wording of a lease does in fact actually give the landlord a right to enter the property to carry out MEES improvements as this would, in certain cases, prevent the exemption from applying.

Further changes to MEES are currently being consulted on by the Government which could see the minimum E rating rising to a C by 2028 or a B by 2030 which could have a significant impact on commercial landlords. It is important that landlords actively manage their portfolio to keep on top of the MEES requirements, EPC ratings and expiry of current EPCs for their properties and ensure compliance and budgeting for any works accordingly.

If you have any questions about the points raised in this article please email info@ts-p.co.uk.