Does MEES Compliance make sense for commercial landlords?

It’s been more than a year since the MEES regulations came in, with threats of fines up to £150,000 for the landlord of any property rented out with an EPC rating of less than E.

Fast forward to August 2019, Property Week reports that we have yet to see a single prosecution for landlords who have failed to reach the required standards.

Does this, then, mean that we have a uniquely compliant rental property sector?

Unfortunately not, warns Property Week.  It seems that far from commercial buildings complying with legislation, the problem is that Trading Standards and Environmental Health officers charged with enforcing compliance simply don’t have the resources to police the issue – meaning that inefficient properties both domestic and commercial remain unchecked.

Put bluntly, despite a growing awareness of the impact climate change could have on the UK, current UK ‘action on landlords if you don’t comply’ is all talk.

BNP Paribas estate research in June highlighted that as many as one sixth of office buildings in the City of London failed to achieve the minimum rating of E, yet most of them are occupied.

Further, research by the BBC last year found even Government buildings were not compliant.

Four of the eleven offices leased by the Department of Business, Energy and Industrial Strategy (BEIS) received the lowest G rating, which meant they were using twice the energy resources of your average office building.  According to a spokesperson, they are now improving and on track to reduce this by two thirds.   It doesn’t however, inspire confidence.

Stephen Knight, operations director at London Trading Standards told Property Week:

“I think many trading standards services would like to be doing more on this if resources allowed.”

Currently the rules only apply to new leases, but as the changes continue, they will apply to existing residential leases from 2020 and from 2023, to commercial leases – enforcement will become easier then, and chances are we will then see a stricter approach – so landlords cannot afford long term complacency.

However, is encouraging a ‘tickbox or fine’approach the right one anyway?  Many low carbon consultants say there are real benefits independent of compliance that make compelling reasons to improve property efficiency.

“ It’s time we promoted common sense compliance instead of ‘steps to tick a legal box’, says Dave Cadwallader, Director, MEES Solutions. 
 
“Making a real impact on climate change may be important but it is not a primary concern to landlords, who simply need guidance as to which low carbon measures offer the best return for their property.
 
“While enforcing MEES compliance is generally lax, sooner or later, authorities will realise there are funds to be had from fines, and will come down heavy handed.
 
“MEES compliance should not be viewed as just a checkbox exercise.  Making the right low carbon changes can deliver huge benefits for the landlord, such as the ability to yield higher rents, creating buildings that employees want to work in and future proofing your property.  Meanwhile, tenants want to benefit from lower operating costs.  
 
“If we want to increase compliance, these are the messages the authorities need to send.  As energy awareness grows, buildings with a rating below an E just won’t be viewed as a viable rental proposition.”

Despite the lack of enforcement, it has been a positive start for MEES compliance in that we have seen many landlords reap the benefits from energy efficiency improvements that they may not otherwise have contemplated.

However, it seems UK plc has some way to go to achieve better energy efficiency and sustainability overall.

If you need any help or advice on improving the energy efficiency of your property portfolio, or achieving MEES certification, please get in touch.