MEES consultation for commercial buildings: from E to B?

The minimum energy efficiency standards (MEES) restrict a landlord’s ability to grant a new tenancy or extend or renew an existing tenancy of certain property having an EPC rating of F or G unless the landlord carries out energy efficiency improvements. From 01 April 2023, the scope of MEES will extend to existing tenancies of commercial property and restrict a landlord’s ability to continue to let property with an F or G rating unless it carries out efficiency improvements.

The government has now issued a consultation looking at the future trajectory for MEES for commercial buildings through to 2030. The consultation applies to properties in England and Wales and closes on 07 January 2020.

The Government notes in the consultation that its preferred target is that, by 2030, all non-domestic privately rented property in England and Wales achieves an EPC rating of B as a minimum, provided the remedial action required meets a seven-year payback test and is therefore cost effective (the EPC B trajectory). The alternative trajectory is that, by 01 April 2030, all commercial buildings achieve a minimum EPC rating of C if required works are cost effective, again based on the seven-year payback test (the EPC C trajectory).

The Government acknowledges that not all buildings can achieve a minimum rating of B or C (as the case may be) and proposes that landlords should be able to continue to lease their premises from 2030 if they can prove that a building has reached the highest EPC band that a cost-effective package of measures can deliver. As part of the consultation, the Government is considering whether to introduce phased milestones or a single 2030 backstop for implementing whichever of the trajectory options is chosen.

The Government favours the EPC B trajectory as, on the basis of the Government’s own calculations, that trajectory delivers “significantly more savings” than the EPC C trajectory and “ensures that landlords across 85% of the existing stock must take action”. While acknowledging that the EPC B trajectory would require investment of approximately £5bn between 2019 and 2030, the Government anticipates that the return on that investment would be “substantial”, with an average payback period of between four and five years, and “bill savings to business in 2030 would be £1bn”. Further details, breakdowns and comparisons are set out in the consultation.

The Government also notes that an EPC cannot reflect or value improvements in operational performance and highlights separate plans to consult in 2020 on introducing mandatory in-use energy performance ratings for non-domestic buildings in the private sector.