From April 2018, the minimum energy efficiency standard (MEES) will apply to commercial and domestic buildings that are rented.
It’s a change that will bring both opportunities and challenges for landlords, lenders, developers, and freehold investors.
The minimum energy efficiency standard (MEES), which took effect in England and Wales in 2015, gave both commercial and domestic buildings energy-efficiency ratings that range from A to G, with F and G being signs of poor performance. Starting in April, it will be illegal to let buildings that do not achieve a minimum rating of E. Unless an exemption is successfully registered by the landlord, no new tenancies will be granted or existing tenancies renewed for F or G rated buildings.
What do landlords have to do to prepare?
Domestic and commercial landlords can prepare for the new standard by reviewing their portfolios to determine which buildings are within scope of the regulations, seeing if exemptions might apply, and reviewing their leases to get a firm understanding of their rights and responsibilities under MEES.
What do freehold investors have to do to prepare?
Freehold investors with a headlease term exceeding 99 years will not be regarded as landlords under the MEES Regulations. Their primary concern will be the possibility of value reduction in any building asset that rates below E. If improvements are necessary, they will have to be resourceful to find tenant landlords willing to sublet a building.