New MEES regulations from 1 April are set to put the heat on landlords of old commercial buildings

Commercial property owners in Worcestershire and Warwickshire could be losing out on millions of pounds in lost rental income if they have failed to prepare for new energy performance regulations which come into effect on 1 April 2023, experts at business property consultants John Truslove are warning.

Ben Truslove, joint managing director of John Truslove, said: “Energy Performance Certificates (EPCs) have been with us for 15 years, but from 1 April 2023, it will be unlawful to continue let a commercial property that does not achieve an EPC of Band E or better.”

Industry figures show that there are 24,000 commercial buildings in the UK with an inadequate EPC, and this equates to around £2.5 billion in potential rental income that could be lost.

The restriction does not apply to licences, leases of less than six months or for more than 99 years, or to properties not requiring EPCs.

But Mr Truslove warned that the new Minimum Energy Efficiency Standards (MEES) requirements from 1 April 2023 could soon be superseded by government regulations currently in the pipeline.

“If passed, the Minimum Energy Performance of Buildings (No.2) Bill will raise the minimum standard for non-domestic property to at least Grade C by April 2027, tightening to Grade B by 2030.

“The Government has a target of achieving net zero emissions by 2050 and the MEES regulations are viewed as a significant factor in achieving this target.”

He said that in some cases it would not require significant investment to uplift a commercial property’s EPC to at least grade E.

“For many buildings, simply improving insulation, upgrading to LED lighting and replacing inefficient heating systems may suffice.”

He pointed out that although 2030 may seem a long way off, in property and business investment terms, it was “almost on our doorstep”.

“Landlords with substantial commercial property portfolios need to start the process of assessing each and every unit to satisfy themselves they will be compliant, not just on 1 April 2023, but bear in mind in maintenance and refurbishment schedules, the need to achieve at least
Grade B by 2030 – which is a significant step up.

“Achieving Grade B will require planning and investment and it is vital that landlords take professional advice from qualified advisors who are up to speed on EPC, insulation technology and the changing environmental climate,” he said.

He said that he and his joint managing director Ian Parker were contacting all landlords in their client portfolio to invite them to discuss how they can meet the new regulations and plan for 2030.

“Six years may seem a long time, but in property investment terms it is a short cycle and will require careful cashflow planning if a portfolio is not to require major investment in a late rush to meet changing regulatory requirements.”

He said that EPC ratings should be forming the basis of the beginning of planning for the dilapidations process because they will provide insight into what a landlord must achieve and what the likely cost will be.

“The short message is talk to us as well as your legal advisors now to save excessive and unexpected calls on your capital over the next few years.

“Planning, and ensuring through professional advice that you get it right first time, will be essential,” he said.

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