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What do the new Minimum Energy Efficiency Standards (MEES) mean for the City of London office market?

Post 1st April 2018, Landlords will not be lawfully permitted to lease or sell properties with an Energy Performance Certificate (EPC) rating of F or G.

EPC ratings explained

All Landlords in the UK are obligated to provide an Energy Performance Certificate (EPC) rating (graded from A – G) for their buildings. The law, introduced in 2007,  is required immediately following construction or on the commencement of marketing for the purposes of sale or leasing.. MEES legislation aims to combat the most ecologically inefficient properties and thereby reduce their footprint on the environment. The property sector currently accounts for around 32% of all UK CO2 emissions and, under the Climate Change Act of 2008, the UK has committed to reducing its total carbon emissions by 80% by 2050. 

 

As demonstrated above – The sale or letting of E or below assets will be prohibited (red & orange)

The EPC rating reflects several contributors, including overall energy usage and the age of the building. As such, there are numerous factors which determine the EPC rating of a commercial property – heating, cooling, hot water, ventilation, and lighting. Whilst building improvements to enhance energy efficiency have been strongly encouraged for some time, there has been a general reticence on the part of Landlords to commit to (often considerable) capital outlay for works which are beneficial to the tenant but do not make financial sense from an investment perspective.  Introducing the The Minimum Energy Efficiency Standards will ensure such improvement works are undertaken. 

How does this affect my building?

Fundamentally, without implementing cost-effective energy efficiency improvements or fulfilling an exemption criterion, you will not be lawfully permitted to lease or sell, an F or G rated asset. EPC ratings of F or G and will be classed as non-compliant and a fine will be imposed. Where the breach is for a period of three months or less the fine will be equivalent to 10% of the rateable value of commercial properties, subject to a minimum penalty of £5,000 and a maximum of £50,000. If the breach is for a period greater than three months, the fine will be equivalent to 20% of the rateable value for commercial properties, subject to a minimum penalty of £10,000. 

How can Newton Perkins help?

Newton Perkins can provide professional advice to help safeguard your buildings against current and future energy efficiency legislation.  In order to ensure your building remains income producing from 1st April 2018, call Newton Perkins for a free consultation. 

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