What do minimum energy efficiency standards mean to commercial landlords?

Posted by Mark Lloyd, Property Mastery Academy on 4 September 2017 | Comments

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From 1st April 2018, minimum energy efficiency standards (MEES) for commercially rented properties come into force.

This means that if premises have an Energy Performance Certificate (EPC) rating of band F or G, then landlords of non-domestic private rented properties (including public sector landlords) can’t let the property to new or existing tenants.

How EPC bands work

The EPC shows the energy efficiency rating on a linear scale of 0 to 150 and then splits it into bands from A to G with A being the most efficient.

The numerical rating is a measure of the CO2 emission from the building in question compared to a Standard Emission Rate (SER) based on a reference building of the same type, size and orientation under standardised occupancy, operation and weather conditions.

Note that it’s not based on the actual energy consumption of the building. The EPC rating analyses the energy performance of the building fabric and fixed building services - then compares it to minimum standards defined in the reference building.

The EPC is accompanied by a report of recommendations based on the input data. These recommendations are divided into short (less than 3 years), medium (3 to 7 years) and long (more than 7 years) payback.

What happens if you receive an F or G rating?

If your commercially rented property has an F or G rating, it usually means urgent action is required to improve the energy performance to achieve at least an E rating.

As an initial step, you could undertake another survey to take into account any changes or improvements since the original EPC was produced. Adding more recent and detailed data and then recalculating the EPC is often the simplest way to improve a property’s rating.

For further action, the recommendations report will give you some idea of where improvements can be made. For instance, it may be worth fitting daylight sensors and occupancy sensors to control the lighting or upgrading heating and cooling controls.

If your building is fitted with old lighting, then switching to LED lighting can make a difference as LEDs are highly efficient and can reduce maintenance costs. A more expensive, but ultimately profitable long-term investment, is to install renewable energy sources such as solar panels.

Commercial landlords should take action now

Landlords should prepare now before this new legislation comes into force, and review their property portfolios to see which fall into the scope of the MEES.

The cost of an EPC depends on the building being assessed, but it may be a sound investment to carrying out energy assessments now to check whether the EPC ratings for your properties are correct. All EPCs are valid for 10 years and can be used for multiple tenancies within that period.

This action could potentially present you with opportunities to increase rental and asset value by initiating energy efficiency improvements and linking them with other upgrades to your commercial properties.

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