On April 1st 2018, new MEES regulations came into force that have various rules about the energy efficiency rating of commercial property.
In general landlords cannot issues a new lease for commercial buildings with an EPC energy efficiency rating of below E. However, there are exemptions. Properties that do not use heating or air-conditioning are among them, as are short tenancies of less than six months. Some, but not all listed buildings are exempt. If the necessary energy efficiency upgrade work alters the structure of a listing building, guidance is needed from local authority conservation officers.
A temporary exemption can be applied for to allow time for upgrade work to be completed. When issuing a new lease for an existing tenant, if they object to the energy efficiency upgrade then this could make the building exempt.
Property owners are advised to seek legal advice if they believe that their building is eligible for an exemption. Failure to comply with MEQES regulations can result in fines of £10,000 or more. Penalties are based on the rateable value of the property and the length of time that the property has not conformed to regulations. Any penalties will be made part of a public record that anybody is entitled to see.
When applying for a commercial mortgage for a building with a less than an E EPC rating, some lenders may make the mortgage conditional on the upgrade work being carried out. They may allow a period of a few months to give the landlord time to upgrade.