How Do the Minimum Energy Efficiency Standards Affect a Commercial Lease?

Understanding your lease agreement is critical whether you are a commercial landlord or tenant. Otherwise, you may breach the lease without realising, opening yourself up to legal consequences. One part of your lease agreement to review is any clause relating to the Minimum Energy Efficiency Standards (MEES). This article will explore how the MEES affect a commercial lease for new and existing tenancies.

What is a Commercial Lease?

A commercial lease is an agreement between a landlord and a business owner to occupy a commercial property in exchange for rent. As a legally binding document, the lease will detail certain terms and conditions, such as:

• the lease end date;
• rent amount;
• any break clause to end the lease early; and 
• repair and maintenance obligations for each party.

Cheat Sheet for Leasing Terms

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What Are the Minimum Energy Efficiency Standards?

The Minimum Energy Efficiency Standards (MEES) refers to legislation. It details, amongst other rules, the requirements for energy efficiency of buildings. MEES requires most properties to have an Energy Performance Certificate. 

Energy Performance Certificate 

An Energy Performance Certificate (EPC) is issued by a domestic energy assessor and gives a property its energy efficiency rating. The rating can range from A to G, with A being the highest efficiency rating of a property and G being the lowest. A property can achieve an A rating by considering the following:

• construction;
• insulation;
• services for heating;
• services for cooling; 
• building use; and 
• from calculating the ‘carbon dioxide equivalent emissions’ for the building.

EPC Provision

When you enter a new commercial lease, if you are the commercial landlord, you must provide your commercial tenant with an EPC for the commercial premises. As a commercial tenant, this will inform you of the property’s energy efficiency. 

If a commercial landlord does not let a prospective commercial tenant see the EPC, they can receive a fine of between £500 and £5,000. As a commercial landlord, you must display your EPC certificate for your commercial property if:

• you have over 500 square metres of useful floor area;
• the public often visits your property; and
• you already have an EPC for commercial lease purposes (or for sale or construction).

EPC Rating

A commercial property must have an EPC rating of a minimum of E. It is, therefore, illegal for a commercial landlord to grant a new lease for a property with less than an EPC of rate E. 

Landlords and tenants should be aware that there are some exceptions to the 1 April 2023 EPC changes, which require all commercial properties, regardless of whether they are an existing or new lease, to have an energy rate of E. This includes commercial leases, which are for less than six months and those that are for more than 99 years. Further exemptions also apply, but these are beyond the scope of this article.

Whether you are a commercial tenant or commercial landlord, keep an eye on energy efficiency laws, as the energy efficiency requirements for commercial properties may change again soon. It is proposed that on 1 April 2027, the minimum requirement of rate E will move to rate C and three years later, in 2030, rate B.

Key Takeaways

Whether you are a landlord or tenant, understanding how the Minimum Energy Efficiency Standards (MEES) affect your commercial lease is critical. These standards provide commercial properties with an Energy Performance Certificate (EPC) ranging from A to G. 

All commercial properties must have an EPC, specifically, a minimum E rating when granting a new lease. As of 1 April 2023, this applies to existing leases too. A commercial landlord must also allow a prospective tenant to view a building’s EPC. Breaching the MEES can carry hefty fines.

If you need help understanding the Minimum Energy Efficiency Standards (MEES), our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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