The UK government’s commitment to improving energy efficiency in buildings has been a cornerstone of its environmental policy. The introduction of Minimum Energy Efficiency Standards (MEES) for commercial properties was hailed as a significant step toward meeting the country’s ambitious carbon reduction targets. However, despite the regulations being in place for several years, the actual impact on improving Energy Performance Certificate (EPC) ratings has been far less substantial than expected. While there have been changes to the rules, a closer look at how they are enforced suggests that progress is slow, and the desired improvements are not materialising at the scale needed.
The Back Story
Where it began
The UK’s drive to improve energy efficiency in buildings, including commercial properties, is central to the country’s net-zero emissions target for 2050. To achieve this, the government implemented the MEES regulations, which came into force for private residential properties in 2018 and were later extended to commercial buildings in 2023. These regulations mandate that commercial properties must meet a minimum EPC rating of E in order to be let or re-let.
While the legislation was designed to incentivise landlords to improve the energy efficiency of their properties, the timelines for enforcement have been spread across long intervals. For many properties, the key trigger events that would require landlords to comply with MEES regulations are not frequent. New lettings are the primary requirement point, meaning that attendance to improve a property’s EPC rating need not be implemented until these events occur, often years apart. As a result, landlords have little immediate necessity to upgrade performance unless a trigger event is applicable.
The Change
Amendments to the existing
The most recent change to the MEES regulations, which came into effect in April 2023, extended the requirement for commercial properties to achieve a minimum EPC rating of E before they could be let or re-let. Whilst this change was expected to drive widespread improvement works in energy efficiency across the commercial property sector, the actual impact has been limited. The once feared onset of a panic to attend works has failed to materialise.
A key issue with this regulatory approach is that the requirements are triggered only during specific events, such as a new letting. This means that many commercial properties may continue to operate with lower EPC ratings until they undergo these triggering events, often not coming about for several years. For landlords with long-term tenants, there is little incentive to upgrade a property’s energy performance until they are faced with the requirement to do so when a lease expires or when they seek a new tenant.
This delayed approach undermines the urgency needed to make substantial progress in improving energy efficiency, affording landlords the opportunity to set aside upgrades, as they are not compelled to act until a trigger event occurs.
The slow pace of change in the commercial property sector can be attributed to several factors. The first and most significant challenge is the financial burden of upgrading a property to meet the minimum EPC requirements. Many commercial properties, especially older buildings, were not originally designed with energy efficiency in mind, and retrofitting these buildings to meet modern standards can be expensive and logistically challenging.
Landlords typically face significant costs when upgrading properties, including improving the thermal performance of the building fabric and / or replacing or significantly upgrading inefficient systems. The lack of means of enforcement owing to the trigger event ‘caveat’, however, affords landlords time and ultimately slows down the progress of the MEES initiative.
Additionally, the complexity of the upgrade process, including the need for Planning permissions, contractor coordination, and the potential disruption to tenants, can further deter landlords from making improvements. Without clear and immediate regulatory enforcement, landlords can afford to delay until they are forced to act by a trigger event.
Looking to the future, the question remains whether the MEES regulations will ultimately succeed in driving widespread improvements in the energy efficiency of commercial properties and whether any flurry of energy efficiency improvements works will ever occur. Whilst the government has hinted that stricter standards may be imposed by 2030, the slow pace of action suggests that the current system is insufficient to achieve the ambitious carbon reduction goals set for the sector.
As it stands, the MEES regulations are limited by the fact that EPC reviews are only triggered during specific events, such as a new letting. As trigger events can occur many years apart, and with EPCs being valid for a decade, many properties will continue to operate below the required energy efficiency standards, with landlords having little incentive to upgrade prior.
For the MEES initiative to have a greater impact, there may need to be a shift towards shorter term, more frequent assessments, necessitating often significant improvements in the shorter term. Such changes could be brought about by the redefining of what constitutes a trigger event or reducing the validity period any new or existing EPC.
Many landlords will hope that their potential for cost incurrence might be mitigated through a change of approach to the regulations in the fulness of time or that grants, low cost government support packages or an even broader scope of mitigating factors might be introduced. Until any such proposals or the possibility of such are firmly dismissed or the necessity for compliance ‘hardened’, any significant volume of schemes of work proposed to improve commercial property energy performance might be unlikely to materialise.
Node Building Consultancy represent landlord and owner-occupier, investor and developer clients nationwide in end of lease and project procurement capacities. From assisting in the assessment of existing energy performance to determining the most cost effective means of achieving improvement through scenario modelling and the implementation of those works, we have invaluable specialist expertise and a proven track record of success in this field. Should you require assistance with your energy performance or project matters, we would be delighted to hear from you.
Many landlords will hope that their potential for cost incurrence might be mitigated through a change of approach to the regulations in the fulness of time or that grants, low cost government support packages or an even broader scope of mitigating factors might be introduced.