Lease Renewals and Minimum Energy Efficiency Standards

Minimum Energy Efficiency Standards (MEES)  are the standards introduced by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. The Regulations have been brought in to improve energy efficiency in both residential and commercial property.

Lease renewals are explicitly included in the tenancies to which the MEES Regulations apply so if you are a landlord with a portfolio that includes business leases with security of tenure, you will need  to change how you approach lease renewals.

Landlords cannot grant a renewal of  an existing  lease of commercial premises that has a substandard EPC rating of below E.  Where a tenancy has protection of the 1954 Act and the tenant has a right to renew, the landlord cannot refuse the renewal on the basis that the property is substandard.   The landlord may  register a six month temporary exemption after the renewal lease has been granted, to give the landlord a bit longer to comply with MEES. During this time, the landlord must improve the energy efficiency rating of the building or register one of the five year exemptions.

Examples of the exemptions landlords can apply for include:
• If a tenant refuses to give consent for the energy efficiency works to take place.
• If a landlord has obtained an independent surveyor’s report which reveals that the works would result in a reduction of more than 5% in the market value of the property.
• If a  landlord applies for planning permission to carry out works and consent is refused.
• If a landlord has made all the improvements that can be made to a property and the property still has a substandard rating.

Landlords should be considering what action to take to protect their position as far as possible – either  by making the necessary improvements, preparing to apply for an exemption, or looking to sell  properties where neither option is feasible as non-compliance with the MEES may result in enforcement action being taken by a local authority.

For queries relating to lease renewals or any other commercial property matters  please contact Zahra  Shah at Meaby&Co on or call 020 7703 5034.

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