Energy Act 2011 – Are you ready for MEES?
The consultation paper recently issued by the Department for Energy & Climate Change ("DECC") discusses a number of proposals to put the flesh on the bones of the provisions of the Energy Act 2011 and plans for regulations on minimum energy efficiency standards ("MEES") for commercial premises in England and Wales.
The Energy Act 2011 was brought in to implement the provisions of the EU Energy Efficiency Directive 2007.
The Government's aim is for all buildings to be 'close to zero' in terms of carbon emissions by 2050.
Energy from non-domestic buildings equates to 12% of all UK CO2 emissions and 18% of those Buildings have an energy efficient rating of 'F' and 'G' – according to DECC 2011, The Carbon Plan.
If the Government adopts the proposals set out in the consultation, from 1 April 2018, all 'eligible properties' must have a minimum energy efficiency rating before they can be let.
It is proposed that those buildings with an energy efficiency rating lower than an 'E' will be prohibited from being let, although it appears to be envisaged that this minimum standard will rise over time.
It is not clear yet whether the regulations will affect any lease granted. The consultation suggests that the regulations may not apply to a lease for a term of less than 6 months or greater than 99 years.
It is also unclear whether the regulations will apply to lease renewals. The consultation suggests that the regulations will only apply to properties already within the EPC regime. Lease renewals do not trigger a requirement for an EPC.
The regulations will be enforced by Trading Standards, and there will be financial penalties for non-compliance.
What protection will there be for Landlords?
The consultation suggests that a landlord will only have to make improvements which can be made at 'no upfront cost' i.e. those improvements which can be financed by a scheme such as the Green Deal.
At the time of writing, the Green Deal Finance Company does not offer finance to non-domestic properties. So clearly the Government is expecting the market to come up with some alternative offerings, is hoping the Green Deal will be rolled out to cover commercial premises or rely on the commercial incentive of a landlord not being able to let its property without completing works sufficient to achieve the minimum rating.
The consultation suggests that there will be exemptions available to landlords, such as if a third party consent is required for the improvements, or if the 'improvements' actually devalue the property, but it is suggested that the exemptions will only last for a period of 5 years. Once that time frame has ended, you are expected to have brought the property up to compliance, or risk further penalties; unless of course you can claim a further valid exemption.
We will be keeping a close eye on the draft regulations and will update you in due course. The Government is aiming to respond to the consultation and lay the regulations early in 2015. The final form of the regulations will be potentially of great significance to property investors and others in the industry.