You’ve probably heard about the recently updated requirements that have come into effect for the UK’s Minimum Energy Efficiency Standards (MEES) and related Energy Performance Certificates (EPC). About 10% of London’s existing office space is expected to fall under this expanded scope—and over the next seven years, requirements will only increase. On the current trajectory, over 70% of existing properties may become impossible to let. Owners of old or low-performing properties must make changes soon or risk stranded assets.
While the age of a commercial building is decidedly a factor in its performance, owners of older buildings can make significant improvements with help from building analytics platforms such as CIM’s PEAK.
In this article, we’ll discuss what the recent changes to MEES mean for UK building owners, and how they can both future-proof their assets and accommodate climate change initiatives like MEES without breaking the bank.
What is MEES?
The UK’s Minimum Energy Efficiency Standards (MEES) first came into force in April 2018. Its origins can be traced back to the Climate Change Act 2008 and the Energy Act 2011, both relatively early steps toward reducing carbon emissions amongst some of the world’s oldest building stock.
MEES was intended to improve the energy efficiency of existing commercial and residential buildings in the UK. New properties are subject to modern efficiency standards under Building Regulations, while MEES is focused solely on improving performance within existing building stock.
In its original form, MEES required commercial landlords to ensure their properties gained a minimum EPC rating of ‘E’ before granting new tenancies to new or existing tenants, unless they were excluded via a valid exemption.
What changes have been implemented?
As of 1 April 2023, any UK property with an EPC rating lower than E may not be leased or rented, unless it is registered as a valid exemption. Properties with F or G ratings will no longer be available for legal tenancy, and steep fines will be imposed on building owners for any breach. As a result, there is significant potential for stranded assets if owners aren’t careful about how they proceed.
Prior to April 2023, building owners could not let an in-scope building without an EPC rating of E or higher. Now, in addition to requiring E ratings for every lease, lessors are also tasked with ensuring that their premises achieve the minimum efficiency standards.
However, improving EPC ratings and creating the needed efficiencies often doesn’t require massive capex. Major refurbishment projects can be expensive and time-consuming, but many buildings can effectively reduce energy consumption simply by optimising their current plant and equipment.
What buildings are required to comply?
All commercial buildings required to have an EPC fall under the scope of MEES. For the purpose of compliance, a building is defined as ‘a roofed construction having walls for which energy is used to condition the indoor climate’. Exceptions include non-residential agricultural buildings, industrial sites and workshops, etc. Any non-exempt premises with EPC ratings of F or G are currently in violation and could be subject to legal action.
Some short-term exemptions based on circumstances are available, including:
- Lack of consent (in which a third party refuses energy improvement works)
- A seven-year payback test, where improvements will not recoup their cost through energy savings over a seven-year period
- Devaluation, where structural improvements would reduce the market value by 5+%
Short leases (six months or less) or long leases (99+ years) are also currently exempt.
How do the changes impact property owners?
With limited exceptions, MEES now applies to all subsisting leases, even where there has been no tenancy renewal, extension, or new lease granted. Property owners with leases that predate 1 April 2018 should pay particular attention to the updated requirements, as they must now comply.
In order to lease any in-scope building, property owners must make efficiency improvements that raise the EPC rating to an E or higher, or risk financial penalties. Owners must also plan ahead for the stricter requirements they will face in coming years as legislation continues to tighten. Many of the exemptions currently available have a short shelf life, so there is no indefinite ‘free pass’—only a short extension of time for qualifying assets.
This change should forecast an increasingly positive ESG profile for the UK’s commercial property sector. Lenders want to attract borrowers with high energy efficiency and strong overall ESG performance, as this will impact their own ESG policies. Owners of low-efficiency buildings may struggle to find financing compared to competitors' higher-rated buildings.
The future of MEES
Rules are only expected to grow stricter to help the built environment achieve Net Zero targets by 2030. Current proposed requirements include a minimum EPC rating of C in 2027 and B in 2030. While nothing has yet been formalised, building owners should consider potentially stricter ratings as they make budgetary decisions now. Building owners, landlords, and tenants alike should understand their obligations in the chain of energy efficiency as regulations continue to tighten.
How can the PEAK platform help?
PEAK can help reduce a building’s energy consumption without costly capital expenditure for equipment replacement and upgrades. As an example, the deployment of PEAK drove operational efficiencies at a multi-tenant office building in Dublin. In 2022 alone, €62K of energy savings were realised without compromise to tenant comfort.
“CIM's PEAK Platform has delivered a number of wins. Energy reduction, improved occupant comfort and greater transparency of workflows and tasks to name just a few. Our team also ironed out a number of small issues with fan coil units that resulted in a bigger overall win of improved operational efficiency.” - Stuart Gaffney, Corporate Account Manager and Associate Director, Burlington Engineering.
In another standout example, some very early efficiency wins have been realised at a commercial site in Glasgow,
“In the short few weeks since PEAK was on boarded at the Cowiesburn-managed property, we have achieved a 17% energy reduction week on week. This equates to about £30,000 in realised energy savings, an impressive ROI of 500%+.” Darren Moran, CIM Account Executive.
This improved level of performance without unnecessary capex explains why building analytics technology is fast emerging as the solution of choice for owners looking to understand and optimise building operations. Building analytics data enables real-time monitoring and analysis, regardless of a building’s age. This data feeds performance dashboards and automation routines that empower operations staff to make faster, better-informed decisions about reduced consumption.
Find out how PEAK can help you stay ahead of MEES. Request a callback from our expert team today.
