Minimum energy efficiency standards (‘MEES’) were introduced by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 and will impact lease negotiations for non-domestic (commercial) private rented property across England and Wales; these regulations require commercial premises to have a minimum energy performance rating which will be demonstrated by an EPC (energy performance certificate).

How does this impact current lease negotiations?

Currently, the MEES regulations will only impact new lease negotiations for commercial premises as they prevent a Landlord from letting commercial premises, unless they have an EPC rating of ‘E’ or above. It is worth noting that new leases also include an existing lease which is being renewed.

It is therefore important to consider whether there is a valid EPC in place for the premises early on in the lease negotiations as, if the EPC does not meet the required standard, energy improvement works may need to be carried out to the premises. Alternatively, if the premises meets the criteria to be considered exempt from the MEES regulations, then the exemption will also need to be registered.

A Landlord will also need to consider the provisions of the lease in light of the regulations, for instance, how to protect the EPC rating when a Tenant is carrying out alterations, controlling the Tenant’s ability to obtain an EPC and rights of access to carry out energy improvement works in the future.

How will MEES impact existing leases?

It will soon be important for Landlords to consider their existing portfolio of commercial premises as from April 2023, Landlords who continue to let commercial premises below an EPC rating of ‘E’ or above will need to carry out energy improvement works.

If you are a Landlord with a large portfolio of commercial property this could be quite an undertaking to check whether each premises has a valid EPC at the required standard, it may also be a costly exercise updating the EPCs and carrying out energy improvement works, where necessary.

There may be some instances where the premises qualifies for an exemption from the MEES regulations, but any exemption will need to be registered.

Who will be responsible for the cost of improvement works?

The MEES regulations place a statutory burden on Landlords to carry out energy improvement works. However, the terms of any existing or proposed lease would need to be examined to check whether the lease passes this burden on to a Tenant.

If you are seeking advice and further information on reviewing your Commercial Leases, we have a team of solicitors who have a wealth of experience in dealing with a variety of clients. Our proactive approach, individual skills and team ethic allow us to deliver creative solutions, seamless service and tailored advice even when the pressure is on. Get in touch to find out how our Commercial Property Team can help you.