If you are a commercial landlord you need to be certain you've got MEES covered by 1 April 2023

After 1 April 2023 a landlord may not let nor continue to let a substandard property unless:

• it has made sufficient energy sufficiency improvements, so that the property is no longer substandard; or
• it has a legitimate exemption from carrying out improvements and has registered on the PRS Exemptions Register.

Landlords should prepare for the prohibition from continuing to let F and G rated properties on 1 April 2023 by carrying out checks and, if necessary, improvement works.  The checks may include:

1=> The EPC rating for the properties in their portfolio to ascertain if there are any that will continue to be let after 1 April 2023 which have an EPC rating of F or G.  However, exercise caution and do not commission an EPC without further checks.  The property may not require an EPC or does not currently have a valid EPC as the existing EPC obtained on the grant of the lease is more than 10 years old, so a new EPC is not required whilst the lease is still continuing.

2 => Do any exemptions apply?  If so, landlords must register them on the PRS Exemptions Register to have effect.  Key exemptions include:

Consent exemptions:

Tenant: if the landlord requires the tenant’s consent to carry out works or to enter the property and the tenant refuses.

Third party: if despite the landlord using reasonable efforts to obtain consent a third-party refuses to give consent to the works or if a third-party grants consent but subject to conditions with which the landlord cannot reasonably comply (e.g. unreasonable costs).  Third parties include the tenant, other tenants or occupiers in a multi-occupation building, lenders, superior landlords, planning authorities or other bodies such as English Heritage.

Devaluation:  proposed improvements will reduce the market value of the property by more than 5% (subject to expert evidence).

All required energy improvements have been made (or there are none that can be carried out) and the EPC rating remains below E.

The required energy efficiency improvements will not provide energy bill savings over a 7-year period.
Short and long leases:  Leases for less than 6 months (where there is no previous continuous occupation for more than 12 months and no right to renew) and leases of more than 99 years are excepted.

3=> Do the existing leases allow the landlord to enter into the property to carry out works? Is the landlord entitled to recover the cost of improvements to the energy efficiency of the property through the service charge?

4=> Check whether any properties are at a marginal rating of D or E.  The Government’s stated intention is to increase the rating requirements by stepped changes to a minimum EPC rating of C in 2027 and B in 2030.  Landlords may wish to futureproof their properties now by carrying out works to ensure that they are not prevented from letting them when the requirements increase.

5=> Check the improvements necessary so that the property is not substandard (I.e. currently E or above).  Liaise with tenants about carrying out and completing the energy efficiency improvements.

6=> Check other provisions in the leases such as the tenant’s right to sublet (a tenant that sublets may commission a new EPC which rates the property lower than the existing EPC) or to carry out alterations.

7=> Does the property actually need an EPC?  The Regulations expressly exclude certain groups of properties from the MEES regime.

Once the review is completed and the landlord has taken any necessary action by carrying out works or registering exemption on the PRS Exemptions Register, the landlord should ensure that its records are updated regularly.  The Exemptions Register must also be updated after the later of 5 years or earlier if the exemption ceases to apply.  Future leases may contain provisions to reflect current and future MEES Regulations.

Landlords should also consider the upcoming changes any time the tenant requests consent to alter the property. It is becoming increasingly important to ensure that alterations including fit-out works do not have an adverse impact on the EPC.