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MSB Solicitors Liverpool
Commercial landlords could face fines of up to £150,000 if they fail to comply with new energy efficient standards on their buildings.
 
In 2015, the Energy Efficient (Private Rented Property) (England and Wales) Regulations brought into force minimum energy efficiency standards (MEES) for both commercial and residential properties.
 
Commercial buildings were given an Energy Performance Certificate (EPC)  rating which went from A-G and the regulations introduced a minimum standard of E which means that any buildings lower than that standard could not be rented out.
 
From April 1 this year, regulations on the Minimum Energy Efficiency Standards (MEES) have become even stricter, preventing landlords of buildings within the scope of MEES from renewing existing leases or granting new leases if the building has an EPC rating less than E, unless there is an exemption.

MEES do not apply to:
 
  • Buildings where an EPC certificate is not required , including certain low energy demand industrial sites, workshops and certain listed buildings
  • Buildings where the EPC is less than 10 years’ old
  • Leases of less than six months where there is no right to renew and the tenant has not be in occupation for more than 12 months
  • Leases longer than a 99-year term
 
If Landlords find that MEES do apply to them, then there are three exemptions where landlords can rent out their commercial building where it is below the required efficiency standard:
 
  • Golden Rule, where an independent assessor determines that all relevant energy efficiency improvements have been made to the property
  • Devaluation, where an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%
  • Third Party Consent, where consent from persons such as a tenant, a superior landlord or planning authorities has been refused or has been given with conditions with which the landlord cannot reasonably comply
  •  
These exemptions are only valid for 5 years and cannot be transferred from landlord to landlord. Landlords must also ensure that they lodge the exemption in the Government’s Central Register.
 
Failure to comply with the new regulations could see commercial landlords facing fines of up to £150,000.It is a good idea for landlords to take this as an early warning, whether or not their leases are up for renewal, as MEES will also apply for all existing leases and tenancies on April 1, 2023.


 
Brad Armstrong, partner in MSB’s commercial property team, said: “Landlords have to bear the cost of upgrading their properties that don’t have the correct efficiency standard and may face losing rent if the property cannot be let, or suffer a reduction in the value of the property.
 
“Landlords will have to consider the best way to approach doing these works as their leases will have requirements and restrictions on works they can do to a property whilst the tenants are in.
 
“Nevertheless, strict energy efficiency standards for commercial buildings have been around for a number of years, now, so any reputable commercial property owner has no excuse for not being up to speed.
 
“They should seek professional advice if they are unsure of exactly what they need to do to be compliant or face the risks and consequences.”

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