The government has published its much anticipated interim response to the consultations on the Minimum Energy Efficiency Standards (MEES) for the non‑domestic private rented sector in England and Wales.
While further detail and legislation are to follow, the response confirms a shift in approach to MEES which the government says reflects its aim of helping tenants in the largest rented buildings save energy and reduce their energy bills, whilst cutting carbon emissions and strengthening energy security.
The interim response confirms the government's intention to take forward the following proposals:
Minimum standard of EPC B proposed for larger buildings from 2031
From 2031, the government intends that all privately rented non-domestic buildings over 1,000 sq m will be required to achieve an EPC rating of at least B, where cost‑effective. This measure will only take effect following the successful passage of secondary legislation through Parliament.
No change for smaller buildings
For now, privately rented non-domestic buildings below 1,000 sq m will remain subject to the current minimum standard of EPC E with no set deadline for going beyond this level.
Interim milestone dropped
The previous proposal to raise the minimum standard for all non-domestic properties to EPC C by 2027 will not be implemented, with the intention of giving the market more time to plan upgrades.
Existing flexibility retained
The current framework, including the 7 year payback test and exemptions, will continue to apply which the government says will ensure improvements are practical, affordable and cost-effective.
Although the interim response provides some welcome and long awaited clarity on the government's direction of travel, the important detail is still outstanding and there is currently no confirmed timetable for the government's full response, secondary legislation or updated guidance required to give effect to these proposals.
Landlords and investors with larger assets should take action now to review their portfolios, assess the cost and deliverability of energy efficiency improvement works, and factor MEES compliance into lease negotiations, valuations and acquisition due diligence. Owners of smaller buildings may have some relief for now but should not assume minimum standards for their buildings will remain at EPC E indefinitely. All parties should continue to factor MEES risk into transactions, valuations and asset management strategies.
The full government response, secondary legislation and updated guidance will need to be monitored closely so that parties can respond promptly once the detail of the new regime is confirmed.
