Landlords And FM Teams Must Act Now:
MEES Deadline Is Imminent
By Stuart Funiciello, Partner at Hartnell Taylor Cook.
The UK's first Minimum Energy Efficiency Standard (MEES) is set to come into force on 1st April this year, a date that is fast approaching. To avoid breaking MEES, landlords will only be able to let a commercial property that has an EPC rating of E or above. This minimum standard will then rise to C in 2027 and finally B in 2030. Yet, as it currently stands, more than 10% of leased commercial buildings in the UK (an estimated 120 million sq. ft) have an EPC rating below E, and only 12% of all registered non-domestic properties have an EPC rating above B. We are behind the curve.
A whopping 88% of buildings in the UK will need to undergo a dramatic change over the next eight years, and there is now significant pressure on landlords and facilities managers to upgrade their assets ahead of April’s deadline. If individuals fail to act, the penalties for non-compliance will be severe, costing significant sums and likely resulting in landlords being saddled with stranded assets that they are unable to lease or sell.
Landlords who have been postponing upgrades in the hopes of a more positive economic outlook are now forcing themselves into a corner. There is a clear indication that the economic climate is set to worsen in the coming months, which means there is now a fresh emphasis for facilities managers to work with landlords to get on the front foot of regulations. Investment today will yield significant benefits in the coming months.
Prepare Now To Reap The Rewards Of The Future
Non-compliance is simply no longer an option. Penalties for leasing a property in breach of the MEES regulations will be the equivalent of 10% of the property’s rateable value, ranging from a minimum penalty of £5,000 and a maximum of £50,000. After three months, the penalty will increase to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.
Despite calls for an extension, the deadline is staying put and there will be more to follow. Acting sooner rather than later will allow enough time for property owners and occupiers to identify, finance and implement the required projects to achieve compliance. To lessen the financial load, measures such as the 7-year payback exemption have been drafted into the legislation, and whilst landlords may be reluctant to invest, the benefits of taking the leap now are striking. Detailed preparation and implementation will result in cost effective and sustainable properties, which will benefit all parties and works towards the common goal of Net Zero Carbon by 2050.
However, reluctance to act before April’s deadline will plunge properties into a vicious cycle in which limited finances and fines will prevent landlords from investing in upgrades, which would ultimately make the process of maintaining and heating their properties cheaper.
In The Name Of Sustainability
In view of last summer, where the UK saw record temperatures that caused wildfires, droughts and mass disruption in transport, we must recognise that we are facing a climate change disaster. There can no longer be a doubt that failing to act on the environment now will cause national disruption, and in the commercial property sector we have our role to play. MEES compliance not only makes fiscal sense, but it will be a key part of getting the UK onto its Net Zero roadmap.
With ESG creeping up boardroom agendas, sustainable buildings are also more attractive prospects for potential occupiers. In addition, improving a buildings EPC rating also has a knock-on effect of offering lower running costs, by reducing energy and electricity bills, so can be increasingly desirable for businesses worried about their own bottom line.
Landlords and facility managers need to act now to meet the upcoming and future MEES deadlines to avoid future financial woes and reap the potential rewards, as delaying compliance will only make sustainability legislation more difficult to implement and fund.
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