EPC & MEES

EPCs have been a legal requirement since 1 April 2008, and the landscape has been evolving ever since.

With over 14 years’ experience in providing non-domestic EPCs, Hagen’s team of EPC assessors can confidently claim to be true specialists in this field.

EPC Requirements & Timeline

Below are a few salient points and historical and future milestones expected to be ratified under the recent government consultation:

Since 2008 it has been a legal requirement for an EPC to be included when a building is sold or let, or on construction for properties with a floor area greater than 50m2, which contain fixed services that condition the interior environment.
Landlords, marketing agents and other third parties must ensure that an EPC has been commissioned before they can market a property for sale or rent and an EPC must be available to prospective purchasers or tenants within 7 days of initiating the marketing process.
There are three levels of building: Level 3, Level 4 and Level 5. The complexity and the services used by that building will determine which level it falls under. EPCs must be produced by an accredited non-domestic energy assessor, who is a member of a government approved accreditation scheme.
An EPC is valid for 10 years, unless there are changes in the property that trigger the demand for a new assessment.
The seller or landlord must provide an EPC free of charge to a prospective buyer or tenant at the earliest opportunity. A copy of the EPC must also be provided to the successful buyer or the person who takes up the tenancy.

An EPC provides an energy rating for a building based on the theoretical (design) performance potential of the building itself (the fabric) and its services (such as heating, ventilation, and lighting).
The EPC must be displayed in properties over 500m2, where they are commonly visited by the public (e.g., a shopping mall, restaurant, theatre, leisure centre etc.), and a valid EPC has already been provided.
There is currently no obligation for an EPC to be prepared unless or until a property is brought to market, either for rent or sale. For properties which are owner-occupied and continue to be so, or are already let under long-term arrangements, there is no obligation to prepare an EPC.

This situation is likely to change under current government proposals whereby we expect a valid EPC will be always required for both privately rented and owner-occupied buildings.
The EPC includes recommendations on how to improve the energy efficiency. There is no statutory requirement to carry out any of the recommended energy efficiency measures stated.

MEES

The Minimum Energy Efficiency Standards (MEES) are a key aspect of the UK government’s goal to increase the environmental performance of real estate.

Currently, the minimum energy efficiency standard is set to an EPC rating of E – but this is all set to change.

The government recognises that we need to do more and act faster if the UK is to reach its target of achieving net zero carbon by 2050 which includes tightening EPC ratings.

We are currently awaiting the ratification of the Government’s recent consultation on raising minimum EPC threshold but it is widely held that these will include moving the MEES threshold to band C in 2027 and band B in 2030.

For existing sub-standard leases (F or G rated), it will be unlawful for a landlord to continue to let the property from 1 April 2023, until such time as the requisite improvement works are carried out.

What does this mean for you?

It is estimated that 85% of all commercial rented properties will be affected and so landlords need to review their MEES strategy and alter it to ensure they can comply with the regulations in time for 2023, 2027 and 2030.

Tenants should expect landlords to undertake thorough examination of any works they plan to undertake at the property because landlords will become increasingly interested to understand what the effects any works will have on their property’s energy efficiency.

MEES relates only to rented properties but can affect the market value on properties for sale, so it is worth considering options to improve the rating ahead of any pending sale.

Guidance outlines how MEES compliance will be monitored and enforced, including compliance notices, financial penalties (fines potentially up to £150,000), publication penalties (public naming and shaming on the Exemptions Register) and rights of appeal.

Application of exclusions and exemptions under MEES are saved on the Exemptions Register.

Exemptions are made on a self-certification basis with enforcement authorities undertaking monitoring and auditing.

A great deal of importance is now being attached to the EPC with price adjustments at transaction based on EPC information being increasingly common. As such, the EPC must be able to withstand scrutiny because an inaccurate one could have costly consequences.

Landlords will only be exempt from complying with MEES if they can demonstrate a few strict criteria for exemption, however, from our experience, the majority of non-domestic buildings will be subject to the requirements, including, contrary to common mis-understanding, properties with listed status.

Conclusion

Clearly, the regulations are having a significant impact on the non-domestic private rented sector and given the potential penalties for non-compliance we would encourage landlords and their agents to risk profile their assets to identify non-MEES compliance now.

This risk profiling will help landlords to implement a strategy plan for improving their assets and mitigating potential lease issues.

With a nationwide network of assessors, we can provide assessments on all commercial buildings regardless of numbers (large portfolios or one-off units), building size and use, including building complexities at level 3, 4 & 5.

If you’re a landlord or fund manager, our team of experienced, commercially minded energy consultants can help you profile the MEES risk on your assets and work with you to develop an efficient, cost-effective strategy to ensure you’re on track to achieve the appropriate EPC rating ahead of the proposed changes.