Experts from law firm TLT and energy provider E.ON advise on meeting minimum energy efficiency standards (MEES) when buying and renting out commercial property
From 1 April 2018 it will be unlawful to grant a tenancy of a property with an EPC rating of below E (known as a sub-standard property) unless an exemption applies and has been validly registered. So what are the risks of buying a sub-standard property?
If you buy a sub-standard property today, and this is let to tenants, you will not be in breach of The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the MEES regulations) on 1 April 2018. However, you could find yourself in breach further down the line when it becomes unlawful to continue to let a sub-standard property. Assuming that you are dealing with a non-domestic property, the prohibition on continuing to let a sub-standard property will come in on 1 April 2023.
If the property is not currently let, or you want to grant additional tenancies prior to 1 April 2018, you can do so now without carrying out any energy improvement works without being in breach of the MEES regulations. However, you should think carefully about whether this is the most prudent course of action. It may be that the works required to raise the EPC rating are fairly inexpensive. Carrying out works to a vacant property is much simpler than doing so with a tenant in situ because the landlord does not have to take into account the rights of the tenant under the lease. A more energy efficient property is also likely to command a higher rent.
There are common energy efficiency quick-wins across a range of commercial building types that are low cost to implement and can improve EPC ratings by either one or two grades.
The building fabric plays the leading role in the energy efficiency of a property, and is therefore a vital element in the EPC rating. For example, over 20 per cent of heat in a building is lost through the roof. Improving insulation levels in this area can often be cost effective, particularly with pitched roofs. Further heat loss takes place through the fabric of the walls. Improving insulation here is particularly cost effective in properties with cavity walls. The procedure causes minimal disruption to staff and business operations during installation, making it suitable to carry out at any time.
HVAC (heating, ventilation and air conditioning) refers to the equipment, distribution network and plant used either collectively or individually to provide fresh filtered air, heating, cooling, and humidity control in a building. Installing more efficient boilers, variable speed heating and cooling pumps, high efficiency chillers and energy efficient system controls are just some of the improvements that will make a difference in this area. Most landlords will have budgeted for upgrading equipment such as boilers and chillers, and they will expect to replace these several times during a building’s lifetime. So by pulling forward planned maintenance and improving inefficient components of the system, rather than replacing like for like, important savings can be made.
Lighting and lighting controls are other areas where relatively simple measures can provide substantial gains. For example, replacing tungsten bulbs or halogen spot lamps with LEDs or compact fluorescent tube lighting can make substantial savings. Lighting controls can also make huge reductions in a building’s energy use, and are not difficult to install. The ideal time for these works would be as part of a general refurbishment during a period of vacant possession, or as ‘one-off’ improvements when the building is wholly or partly occupied. While these improvements can be implemented in an occupied office, it will take considerably more time to carry out.