The challenge of retrofitting commercial properties to meet minimum energy efficiency standards
The Minimum Energy Efficiency Standards or MEES were introduced in 2018 with the goal of increasing energy efficiency in properties. Most people are familiar with the requirement to have an EPC for any sale or lease of a property and this sets out the energy efficiency rating as well as giving very general guidance on steps that can be taken to improve the level.
Currently commercial properties need to be a minimum of E for them to be sold or let however this requirement is set to increase to a minimum of C in 2027 and B by 2030. However residential properties will have this requirement from 2025.
This is going to cause a very large headache especially in the Care Industry where operators are already subject to increases in energy bills, issues over staffing and increased costs versus income levels.
Whilst new developments already ensure they hit a minimum standard the real challenge lies with existing property some of which will be decades old.
What do property owners need to do to comply with MEES?
First it should be noted that the responsibility will lie with the landlord/owner and cannot be delegated if the property is let out. There will need to be an assessment of the property portfolio and which is classified as residential and which is classified as commercial as this will dictate the timescales.
It also should be noted that there are exemptions in place, for example commercial leases under 6 months or over 99 years do not require an EPC to be given to a tenant. Commercial properties also have the following exemptions:
- Seven-year payback: where a landlord can show that the cost of implementing a recommended improvement is greater than the expected energy bills savings over seven years.
- All improvements made: where all the recommended energy efficiency improvements have been made to the property but the EPC remains below E.
- Consent: where implementing a recommendation requires the landlord to first get consent from a third party, such as the local authority or superior landlord.
- Devaluation exemption: where an independent chartered surveyor advises that the installation of specific energy efficiency measures would reduce the market value of the property by more than 5%.
Note any of the above exemptions must be registered on the PRS Exemptions Register by the landlord and will only be valid from the point of registration. Exemptions cannot be transferred to a new owner or landlord.
How do I assess what is needed to meet minimum energy efficiency standards?
The EPC will set out the possible works required to improve the energy efficiency level but it is wise to obtain a full report to provide all options together with looking at cost savings and costs of implementation. Some options will simply not be viable for example air source heat pumps require a very high level of existing energy efficiency to function properly.
What happens if my property does not comply with minimum energy efficiency standards?
Non compliance can lead to fines of up to £150,000, the size of fine will depend on the rateable value of the property and the length of the breach of MEES.
Forming your estate strategy
Energy efficiency measure should be one part of an overall estate strategy, the property and land are the biggest asset of an operator and the challenge comes from both ensuring its compliance with regulations alongside ensuring that use is maximised both for generating income as well as cost saving.
All operator should have a full set out estate strategy dealing with:
- An assessment of the land and buildings as to the legal restrictions of use and any barriers to future sales/alternate use.
- A breakdown of all parcels of land with potential options to generate income.
- A comprehensive long term energy strategy both in terms of steps to reduce energy costs and improve energy efficiency as well as looking at long term energy security through renewable generation methods.
How we can help - Claim your complementary estate review
At RWK Goodman we currently provide a complimentary estate review for those involved in the Health and Social Care industry.