Minimum Energy Performance Standards

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News article

Are you ready for the new Minimum Energy Performance Standards (MEPS)?

October 2015

commercial news

From April 2018, subject to certain exemptions, domestic (Residential)  and non-domestic (Commercial) landlords are required to ensure that their properties reach at least an EPC rating of E, or have installed improvements that could be funded by a Green Deal, ECO, government or third party subsidy, before granting, renewing or extending a new lease.

Where the property does not reach an E EPC rating (i.e. is rated F or G), the landlord will also need to register an exemption. Properties will require a minimum energy performance certificate (EPC) rating of E by 1 April 2018 (for all new leases) and by 1 April 2020 (for all existing domestic leases) and 1 April 2023 (for all existing non domestic leases).

What are MEPS?

The Energy Act 2011 commits the Secretary of State for Energy and Climate Change to bring into force by 1 April 2018 regulations making it unlawful to let properties in England and Wales which do not meet a prescribed minimum energy performance standard (MEPS).

All rental properties which require an Energy Performance Certificate (EPC) in accordance with the Energy Performance of Buildings Regulations 2012 will be within scope.

How and when will the market be affected?

Regulations will apply from the 1st April 2018. The main impacts for the commercial property industry are:

  • Data from the national EPC register indicates that 18% of commercial property stock has EPC ratings of F or G and another 20% are rated E.
  • The new minimum standards apply to all lettings and re-lettings, including sub-lettings and assignments and transfers to Self-Invested Pension Plans. 
  • Valuations and rent reviews of properties could also be affected if their marketability is diminished.
  • Implications for dilapidation liabilities at lease ends could also exist.

Investment Property Forum research suggests that, for most building types, the EPC banding can be improved by increasing refurbishment costs by only 2 or 3%.

Property owners and investors can address two things to be prepared for the impending changes in regulation:

  • Find out the EPC rating of owned property.
  • Utilise the time efficiently between now and 2018 to take advantage of void periods and undertake planned maintenance.

The key is preparation; property owners will put themselves under unnecessary pressure if they don’t plan well in advance of the new regulations.

For further information or advice on how best to mitigate the effects of the new EPC legislation please contact your local Fisher German LLP office. A list of our commercial offices can be found here.

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