1 April 2023 is a key date for the minimum energy efficiency standards (MEES) to commercial property in England and Wales as from then a landlord cannot continue to let commercial property, regardless of when the lease was entered into, if the property has an energy performance certificate (EPC) rating of either ‘F’ or ‘G’, unless very limited exemptions apply.
My earlier article Energy efficiency drive puts pressure on the private rented sector – new standards from 1st April 2023, which can be found here gives a bit more detail and sets out the key exemptions but in summary MEES has already applied to the grant of new leases or the renewal or extension of existing leases since 1 April 2018 and where a property is let, or continues to be let, in breach of MEES, the lease remains valid and in force, but the landlord will be in breach of MEES and exposed to potential penalties, unless an exemption applies. That said, it is unlawful to grant a new lease of property with an ‘F’ or ‘G’ rating or, from 1 April 2023, to continue leases at such a property but this only refers to the landlord becoming potentially liable for penalties imposed by the local authority as the enforcers.
The penalties are not insignificant, apply per property and they are based on the length of time the landlord is in breach. For a breach of less than three months the penalty is the greater of £5,000 and 10% of the rateable value up to a maximum of £50,000, for breaches lasting longer than 3 months the fine increases to the greater of £10,000 and 20% of the rateable value up to a maximum of £150,000. In addition to the financial impact landlords also need to consider the potential reputational damage as the local authority will enter the landlord’s details on the publicly accessible part of the Government EPC Exemptions Register. It is not difficult to envisage that checking this will become part of a savvy tenant’s checks on a potential landlord and could make the difference between a tenant taking your property or not.
When you are taking a new lease as tenant or granting one as a landlord, your benefits and burdens under MEES needs careful consideration as part of your due diligence and the team here are happy to advise. Please contact Nick Morrison on 01494 521301 for an initial discussion.