Improve your EPC rating ahead of the 1 April MEES deadline.

A timely read for landlords from our Real Estate Lead, Emma Cordiner. Because of the updated energy efficiency calculator, you might be able to improve your EPC rating ahead of the 1 April MEES deadline.

Recently, I learned that the way EPC ratings are actually calculated was adjusted in mid 2022. As a result, properties heated using electricity may have an improved EPC rating if re-assessed now. Read on for more on this, and the upcoming MEES changes.

The real estate sector is aware of the 1 April 2023 deadline for compliance with changes to the Minimum Energy Efficiency Standards (MEES). In short, subject to certain exemptions, it will be prohibited to let or continue to let a sub-standard commercial property (those with a rating below “E”) beyond 1 April 2023, with penalties including fines of up to £150,000, and the naming and shaming of non-compliant landlords.

Landlords will likely be aware of any improvements they need to make to any sub-standard properties prior to the deadline. But for any landlords who haven’t quite got around to implementing these, there is one thing that may be worth doing: if the property in question is heated using electricity, consider getting a new EPC.

In June 2022, “SBEM” (essentially the energy efficiency calculator for commercial property) was updated to version 6.1. Of note, were changes to the “calculator” which saw the very significant reduction of the carbon emissions factor associated with properties’ electricity usage. The rationale? Because a sizeable proportion of the UK’s electricity is now sourced from renewable or low carbon sources. The result has been that when assessed using the new version of SBEM, many properties have better EPC ratings than they had when they were assessed using the 2013 version of the calculator.

Whilst the focus is currently on April 2023 and achieving ratings of E and above, government proposals look set to require submission of a valid EPC to a new online database for every let commercial property by 1 April in both 2025 and 2028. It’s then likely every such property will need to have a C or above rating by 1 April 2027, and then a B or above rating by 1 April 2030, or, by either such date, have achieved the highest rating achievable using a “cost-effective package of measures”.

All “some way off”, but improvement works take time to plan, cost, schedule, and to obtain consents for – from tenants, superior landlords, lenders, possibly the planning authorities. If the sale, financing or refinancing of a property is on the agenda, prospective buyers and lenders will be looking keenly at EPC ratings and at proposals for improvement – these will go to property value, and lending decisions, well ahead of any actual deadlines. Then there is the matter of being able to continue to let, and re-let investment property – from a regulatory perspective, but existing and would-be tenants will also have a sharp eye on all things energy efficiency, sustainability, and social responsibility – plus their own and by association, their landlords’ reputations. For landlords, any shortcomings will feed into marketability and the rent achievable.