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MEES Regulations changes coming 1st April

On 1 April 2023, the long-awaited Minimum Energy Efficiency Standards (MEES) Regulations come into effect, affecting commercial landlords whose properties are energy inefficient.

On the same day, the rateable values of commercial properties in England and Wales will be revalued.

Read on to understand how these changes could affect your properties.

MEES Regulations

From 1 April 2018, no new lease could be granted of a commercial property which had an EPC rating of “F” or “G” until the property owner increased the energy efficiency to a rating to at least an “E” . Those landlords whose properties were had a rating of “F” or “G” but which were already subject to a lease were not required to make any alterations to the energy efficiency.

However, those same landlords who escaped having to make alterations in 2018 will now be caught by the latest in a string of changes being implemented over the course of this decade.

As of 1 April 2023, it will be unlawful to let or continue to let any commercial property which has an EPC rating below “E”. In terms of enforcement, local authorities will be responsible for ensuring that landlords comply with the new regulations. They will have the power to issue fines of up to £5,000 for non-compliance, as well as the ability to take landlords to court if they fail to take action to improve the energy efficiency of their property.

In order to prepare for the new regulations, landlords should ensure that they have an up-to-date EPC and that the rating is at least an “E” grade.

It is also worth noting that the current MEES regulations exempt some properties from the energy efficiency requirements, such as those that have already made all the relevant energy efficiency improvements that can be made, or those that are listed buildings.

Rateable Values of Commercial Properties

From 1 April 2023, commercial property owners will be paying reviewed rates for their buildings.

Business rates are reviewed periodically and are calculated on the value of properties two years prior. The last review was due to occur on 1 April 2021 - when the country was coming to the end of the longest lockdown period of the COVID pandemic – but would have meant businesses paying rates based on values of properties in April 2019 when the UK economy was far stronger. With businesses (in particular, retailers and businesses in the hospitality and leisure sectors) already struggling through multiple periods of forced closures, the government postponed the revaluation by two years.

The new rates business will pay from 1 April 2023 are therefore based on the values of properties on 1 April 2021.

As you may expect, retail properties were not highly valued at the time, which should result in huge savings for retail businesses now. Obviously, some areas of the UK will see more savings than others, however Drapers Online published an article earlier this month suggesting that retail properties in England and Wales should see an average drop of 10% in their rates bills, and that is before applying the rates support package which the government announced in its Autumn Budget.

The outlook is not so bright for warehouse owners, though. The same Drapers article estimates an average increase of 12% in rates bills for warehouse properties in England and Wales.

Commercial Property owners should be planning for the future, contacting their local councils and clarifying the rates invoices they will be expected to pay from 1 April 2023.

There is a process of appealing against a rates bill increase.

If you would like BPE to put you in contact with professionals who can assist you in this process, please feel free to contact one of BPE’s Commercial Property team.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.

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