What is MEES?
Non-Domestic Energy Performance Certificates (EPCs) serve as a good starting point in understanding a commercial building’s energy efficiency. Unlike domestic EPCs, the rating is based on the estimated carbon emissions of the building and is given a rating from A+ to G, with A+ being the most efficient and G being the least efficient.
A Non-Domestic EPC has been a requirement for the marketing of a commercial property since 2008 and each EPC is valid for 10 years. However, in recent years the UK government has acknowledged the built environment as a major contributor to Greenhous Gas (GHG) emissions and has aimed to improve the quality and energy efficiency of the worst performing privately rented houses and buildings through the introduction of MEES.
The Minimum Energy Efficiency Standards (MEES) was first introduced in 2015 by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 with the aim of ensuring commercial properties meet minimum energy efficiency levels to help the UK meet its 2050 Net Zero pledge. As of April 2018 it became unlawful for landlords of buildings within the scope of MEES Regulations to renew existing or grant new tenancies if the building has less than the minimum EPC rating of E. This has recently been changed in April 2023, meaning landlords can no longer continue to let any building which have an EPC rating less than E.
Future Projections
Since the introduction of MEES it has always been anticipated that the bar will be raised. In the energy white paper Powering our Net Zero Future (2020), the government confirmed that the future trajectory of MEES in relation to commercial property will mean an EPC rating of B will be required by 2030, where cost effective.
This requirement is expected to be phased in with an interim milestone of an EPC rating of C by 2027. Although it is important to recognise that this proposal, which was subject to consultation by the Government in 2021, is still not adopted. At the time of the consultation, it was anticipated that the government would publish responses in late 2021 with a view to amend regulations which are due to come into force on 1 April 2025. To date no government responses have been published, raising doubts about whether it will be realistic to impose an interim milestone for 2027.
Should this be adopted, it will be a requirement that landlords must provide a valid EPC with the correct rating as of April 2027 and 2030 respectively, or face penalties. This expected trajectory of changes to the regulations means landlords will now have to future proof their buildings against this. This will either have to be done during a new building’s design stages or through retrofit measures in existing properties. The uncertainty is leaving many in the industry confused as to whether these standards should be applicable, and what impact this should have in negotiations on property transactions.
Why MEES and EPCs Ratings Matter
Environmental Impact – The introduction of MEES and the required higher EPC ratings helps reduce a buildings carbon emissions by improving its energy efficiency. More efficient buildings will produce less GHG (through reduced electricity and gas consumption) and help combat climate change and its connected environmental impacts. According to Savills 2021 research article ‘Operational Carbon – a focus on energy efficiency’, in equivalent sized dwellings each EPC rating climbed represents around a 30-40% reduction in CO2 emissions per year on a diminishing scale.
ESG Requirements – Investors are demanding high EPC ratings as part of their ESG requirements. High EPCs align with EU Taxonomy and are supported in ESG disclosures, such as the Global Real Estate Sustainability Benchmark (GRESB). Also, by ensuring higher EPC ratings it can enhance the long-term sustainability of a property portfolio and meet stakeholder expectations, whilst complying with emerging MEES regulations and avoid stranding risk.
Enhanced Property Value – Higher EPC ratings can enhance the value of properties. This is due to a higher EPC rating correlates with the building being more energy efficient, resulting in reduced operational costs. Energy efficient buildings are more attractive to potential buyers or tenants and an increase form a G rating to an A rating could increase the property value by up to 14% (MoneySuperMarket, 2022)
How can Envision Help?
There are practical ways in which EPC ratings can be improved including the adoption of efficient lighting, more efficient electrically – led heating systems; the addition or replacement of better performing insulation, use of renewable energy sources and more efficient ventilation. Ensuring non-domestic buildings operate as efficiently as possible and improve their carbon footprints is critical in assisting the UK’s net-zero targets. Envision offers property owners technical guidance on the most efficient and cost-effective ways to improve their buildings EPC ratings. We regularly carry out surveys of existing buildings and provide EPC improvement studies across a range of building types, providing a tailored solution that best aligns with our clients ambitions.