MEES, EPCs and Cowboy Hats
For the past few years, energy efficiency is becoming a focal point for businesses and policymakers.
This includes the Minimum Energy Efficiency Standards (MEES), which since 2018 has regulated new lettings of commercial properties based on buildings’ Energy Performance Certificate ratings (in England and Wales). From 1 April 2023, a new application of will make it unlawful for landlords to continue to let buildings with an F or a G (sub-standard) rating, extended to all leases.
Experts from CBRE and CMS Law broke down this complex regulatory area, and explained in simple and clear terms what MEES and EPCs mean in practice, including looking at the impact of MEES compliance on portfolios and of EPCs on asset value.
For MEES, the relevant improvements are those which:
- fall within prescribed classes of works (usually by reference to Building Regulations);
- are recommended in an EPC recommendation report or a surveyor's report; and
- would achieve a simple payback - through a reduction in energy bills - in seven years or less
When it comes to sectors such as data centres, if a building is transacted, leased, sold or constructed, it will be required to provide customers with an EPC. However, MEES only applies to lettings (although unlikely to apply to co-location agreements).
Of note, EPCs don’t show the real carbon footprint of a building, as they model energy use, not performance. Hence why one should caution against poor EPC assessments, as they often result in poor ratings. In fact, EPCs used to be the wild west, and one of the presenters testified that he’s even met assessors wearing cowboy hats. With regulation, this is improving, giving confidence to businesses to audit assessors and assess the appropriateness of recommendation reports (might be difficult to get a wind turbine in an inner city building).
MEES and Net Zero
MEES obligations are anticipated to become stricter in the coming decade with likely tightening of ratings in the run to Net Zero ambitions in 2030 and the Government’s overarching commitment to reach net-zero greenhouse gas emissions by 2050. It is also worth noting, that lenders are increasingly assessing EPCs/MEES risk as an ESG component of their lending.
Spending time and money on efficiency measures will improve a building’s performance in the future. This long-term thinking is a sustainable approach to property management.
techUK is committed to helping our members, our sector, and all other industries to reach net zero.
Please find the slides and the recording below to find out more about what:
- What is MEES and changes as of 1 April 2023?
- Enforcement and penalties
- Exemptions from MEES
- Data centre considerations
- The future of EPCs and MEES
- EPCs in real estate
- What does an EPC actually represent?
- What can we use an EPC for?
- EPCs may impact how assets are valued
Keith Barber CMS
Keith Barber is a senior associate in the Real Estate transactional team. He has over 10 years’ experience in commercial real estate, advising a wide range of institutional landlords, developers and corporate occupiers across a wide range of sectors. He has particular experience in investment acquisitions and disposals as well as site assembly and development work. He is part of the Green Leases working group at CMS and has a particular interest in energy matters affecting real estate. He is also a member of the Investment Property Forum.
Rebecca Roffe CMS
Rebecca is a Partner in our Planning Group in Sheffield with over 10 years of experience in all planning and environmental matters. She deals with contentious and non-contentious issues for investors, developers, consenting authorities, contractors and operators, particularly in the energy and climate change, real estate, and infrastructure sectors. She focuses on derisking investment in, and development of, complex schemes through strategic advice and novel approaches to risk allocation. She has deep expertise in land assembly and CPO, environmental impact and habitats assessment, Development Consent Order applications, planning/highways agreements, enforcement and inquiry work, energy and sustainability regulation and contaminated land.
Sam Carson CBRE
Sam leads CBRE's approach to sustainability within the UK Valuation & Advisory business. Sam is responsible for working with clients and valuers to integrate sustainability and ESG considerations within our Valuation Business, working closely with our CBRE’s wider ESG Consultancy and sustainability teams both within the UK and across Continental Europe.
You can watch the full webinar here:
Click here to download the slides.
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