Putting Energy Efficiency First: The MEES Government Deadline (And How it Might Affect You)

This is a featured post written by Nexus Energy Solutions.

With almost a third of carbon emissions in the UK coming from heating homes and businesses, it’s no surprise that the Government is keen to enforce new energy efficiency standards in April of next year.

From the 1st of April 2018, the government will impose the Minimum Energy Efficiency Standards (MEES) for rented commercial buildings; standards which will, for the first time, put value on energy efficiency. These new measures will mean that properties with an EPC rating of F or G (Nexus Energy Solutions) would not be allowed to be re-let until relevant improvements are made to boost their ratings up to at least an E.

The new guidelines - thoroughly set out in a 95-page document - come at a time when the Government has shown clear interest and purpose in shrinking the UK’s current level of carbon emissions, with the release of the long-awaited Clean Growth Strategy (CGS) last month. This broad strategy details policies and proposals that aim to deliver increased economic growth through renewable and sustainable sources, reducing the UK’s emissions to help meet its carbon budgets over the next 15 years.

Increased demand for energy efficiency measures is likely to support growth and jobs within the energy efficiency supply chain, creating greater competition which can help stimulate innovation. This, in turn, would lower the end costs of installation methods to businesses and households.

Currently, with as many as one in four landlords unaware of their properties’ EPC rating - a certificate required by law - and an estimated 400,000 properties at risk of being unlettable due to their inability to meet the new standards, letting agents have urged them to act swiftly and began preparing, so they aren’t caught out and risk being penalised.

The likelihood of higher MEES thresholds in the future also indicates the need to be aware of ‘at risk’ premises with an EPC of D or E already, for both landlords and purchasers.

However, with the potential for a loss of income while their property is legally unlettable, landlords may feel a little sour towards the new MEES.

But there are opportunities on offer.

Landlords can engage with tenants to enter ‘green leases’, where the environmental management and costs of the property - for example, specific improvements and utility bills - are shared, offering benefits to both parties. The government has also said that along with the increased tenant satisfaction, other benefits including less regular maintenance and more attractive properties may present themselves.

In addition, property value is likely to increase along with the potential to increase rental value, particularly if making energy efficiency improvements are combined with other upgrades. Research carried out in the past has also showed that the more energy efficient homes are, the shorter amount of time they are ‘void’, or empty.

Although retrofit funding has been dramatically reduced over the last few years, the current domestic regulations are based on a principle of ‘no cost to the landlord’. This means that landlords of F or G rated properties will only have to make improvements completely using third party finance, including the Green Deal; a financial arrangement offered through the Pay As You Save mechanism.

Even though the MEES legislation has been in place since March 2015, it is still uncertain as to how it will practically work. Although making MEES an effective piece of legislation relating to the Government’s wider decarbonising plan, guidance for landlords, lenders and tenants that was expected to be published from DECC (the now dissolved Department of Energy and Climate Change) has yet to be seen.

To stir the interest in getting homeowners and landlords to reduce their carbon footprint, various groups are proposing incentivising ideas. Council tax rebates, along with a reduction of stamp duty for greener houses, are just two recommendations which are being considered by ministers.

The government also aims to simplify the current requirements on companies for measuring and reporting their buildings’ energy usage, and an open consultation has been published which allows views to be put forward on a new reporting framework, set for introduction in 2019. The consultation seeks views around what should be reported, who the reporting requirements will apply to, along with the reporting thresholds.

Although the MEES are a step in the right direction in terms of getting the UK up to scratch on lowering their carbon emissions, they are but a small stage in the wider scheme of things, and the shift towards clean growth will be a policy leader for many years to come.

Capital at risk