Now is the time to review energy efficiency ratings, advise Larken & Co Solicitors

Solicitors Larken & Co welcome Luke Tattersall-Smith to their team. Luke specialises in commercial property transactions, acting in freehold and leasehold sales and purchases, lease grants and renewals, site acquisition and disposal, strategic land contracts and related commercial finance/securitisation.

He has experience in acting for a range of clients, from property developers and builders to private clients, charities and farm partnerships.

“Luke is a highly skilled lawyer and we are pleased to welcome him. This is an important appointment for us in our plans for continuing the development of our services to businesses and the public," said Denise Ryan, senior partner.

Luke has specialised in property matters for many years, both for landlords and tenants. Here, he considers the new Minimum Energy Efficiency Standards ­— commonly known as MEES ­— which come into force from April 1, and its impact on commercial landlords.

MEES has applied to the granting of new leases and lease renewals since April 2018, but had not applied to leases already in existence prior to that date.

However, from April 1 landlords will be in breach of the new MEES requirements by continuing to let a commercial property where it has an Energy Performance Certificate (EPC) rating of E or below, unless they can show that they have made and implemented all possible cost-effective energy efficiency improvements to their property as prescribed by the new standards.

These include the installation of double-glazing, solar panels, or upgraded insulation to walls and pipework.

EPCs are determined by accredited assessors who measure various aspects of a building’s energy efficiency to get an end score, which translates to a grade.

A score of 0–25 is an A, while a score of 150 or more is a G.

From April 1, commercial buildings that do not have an EPC rating of E or above will not be able to be traded or leased.

Current government legislation intends to go even further and increase the rating to C in 2027, and B in 2030 to help its ambition to reach net zero emissions by 2050.

There are certain circumstances in which an EPC may not be required, for example, where the property is a listed building or in a conservation area, or where compliance with MEES would unacceptably alter its characterful appearance.

There are also exemptions where a building is used as a place of worship and for religious activities, with exemptions also applying to certain non-residential agricultural buildings, such as barns or stables that have a low energy demand.

Most exemptions last for only five years, although can be claimed more than once if suitable documentary evidence can be provided.

Landlords looking for a tenanted commercial property will need to carry out careful due diligence and instruct a surveyor to inspect a building’s condition to ensure compliance.

Landlords acquiring a tenanted property falling short of the new MEES requirements will be afforded a temporary six-month window to bring a property up to standard.

In practice, this does not afford landlords much time to comply.

With the expansion of MEES regulations, landlords must consider acting now to carry out improvement works to their portfolio.

But who will pay?

Landlords need to consider if it is appropriate for them to bear such costs or if their lease may allow them to pass them on to, or share with tenants and occupiers.

For commercial landlords, this could mean rental income is under threat if their building’s EPC ratings are not improved. Not only will these properties not be able to be leased, but owners will also face a fine of around 12.5% of the property’s rateable value if they fail to meet the minimum requirements.

There’s no doubt that these changes will shake up the lettings industry. By landlords taking a proactive approach now to review their portfolio and upgrade EPC ratings, it will not only enable properties to continue to be leased and traded post-April but also set the industry up for the more challenging legislative updates in 2027, 2030 and beyond.

Anyone wanting more information about MEES or any other commercial property issue, can call Luke at Larken & Co, Newark, on 01636 703333 or email luke.tattersall-smith@larken.co.uk