One-fifth of commercial energy efficiency standards drop ahead of MEES deadline

A Minimum Energy Efficiency Standard (MEES) will take effect as of 1st April 2018, imposing new rules on both domestic and commercial properties within the private rental sector.

These new rules will prohibit landlords from granting a tenancy to new or existing tenants if the property has an Energy Performance Certificate (EPC) rating below band ‘E’.

But less than two months ahead of the deadline, evidence shows that many properties are still not complaint with MEES.

Research carried out by real estate software provider arbnco shows that 17.7% of the 3,620 buildings registered on the company’s estates platform achieved a lower Energy Performance Certificate (EPC) rating.

Nearly 15% of the properties are now rated ‘F’ or ‘G’, deeming them ‘sub-standard’. One in ten (11%) of E ratings dropped to the lower bands over a 12-month period.

Simon West, co-founder and director at arbnco said: “MEES has been on the horizon for a long time now, but the statistics from our re-simulation tell us that some commercial real estate investors and subsequent stakeholders are still not heeding the warning.

“Those who are in the F and G categories have less than two months to ensure compliance, or else risk impacting the capital value of their assets.”

‘Stark warning’

The Government-approved software tool calculates the energy required to heat, ventilate, cool and light a commercial property under ‘normal’ working conditions.

Based on this representative sample of data, it is estimated that up to £130bn of the UK commercial market could be at risk of MEES non-compliance.

West continued: “For real estate investors with a large number of properties in their portfolio, the fact that almost 20% of buildings on our platform are performing worse than previously should come as a stark warning.

“It demonstrates how important it is for investors to continuously monitor and keep track of the properties in their portfolio.”

Commercial landlords that fail to comply with MEES could face fines of up to £150,000. It is estimated that as much as 20% of commercial properties in the UK will fail to meet the new standards.

Some experts have claimed the new regulation could trigger the emergence of a green rental market. Residential mortgage-backed security (RMBS) investors are likely to realise the potential for additional credit risk arising as a result of non-compliance with MEES, according to credit rating agency DBRS.

George Ogleby