Most pharmacists will probably be aware of the MEES Regulations (“the Regulations”), which have been in effect since March 2018. They apply to residential and commercial properties – we are only discussing commercial properties here – and require a property to meet a minimum Energy Performance Certificate (EPC) rating (currently ‘E’, but likely to be ‘C’ or ‘B’ in the future). Currently the Regulations only apply where a new lease is granted (including renewals), but from April 2023, they will apply to all lettings, even those already in existence.
‘The Regulations will not apply after Brexit’
Whilst the original legislation that introduced EPCs and the Regulations originated from the European Union, the provisions have been incorporated into UK law.
‘Listed buildings are automatically exempt’
Listed buildings are highly likely to be exempt, but there is no one size fits all approach. There is conflicting and confusing advice out there for pharmacists who operate from listed buildings. Historic England advises that “since January 2013 listed buildings have been exempted from the need to have an EPC”. In contrast, guidance published by the government says it is a ‘common misunderstanding’ that they are always exempt.
The original legislation states that EPCs are not required for “buildings officially protected... because of their specific historical or architectural merit, in so far as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance”.
Pharmacists operating from a listed building need to know what the minimum energy performance requirements are before they can judge whether they would unacceptably alter the property. To do this, a draft EPC should be prepared which, with a recommendation report, will identify what works are needed. Pharmacists can then make an informed decision as to whether or not the property is exempt.
‘The Regulations impose a new obligation to obtain an EPC’
NOT TRUE, AT PRESENT
The transactions which give rise to the need for an EPC are those listed in the EPC Regulations. This, however, is likely to change as there are potential loopholes for compliance. For example, if a lease was granted in 2012 for 15 years with an EPC giving a rating of ‘G’, the EPC would expire in 2022 (they only last for 10 years), leaving no EPC rating for the remainder of the lease term. If there is no EPC rating, the Regulations cannot apply. We think the government will at some point impose new triggers for EPCs.
‘An EPC is not required for a renewal’
THIS IS DEFINITELY A GREY AREA
One interpretation is that an EPC is only required on a letting to a ‘prospective tenant’. An existing tenant is likely to be familiar with the property’s energy efficiency already. Accordingly, the requirement can be interpreted as applying only to a letting where there is a new tenant.
The opposing view is that ‘prospective’ simply refers to all tenants, existing or new, as an existing tenant has a choice to leave or stay and EPC ratings can change. The MEES guidance clearly states that renewals are captured by MEES; indeed, there is a temporary exemption for landlords in certain renewal circumstances. However, this conflicts with the apparent exemption in the EPC regulations.
‘Failure to comply with MEES requirements makes a lease invalid’
The effect of a breach of the Regulations is that the landlord is liable for a fine only. A lease does not become invalid.
‘Landlords can pass on the obligation to do the required improvements to tenants’
The MEES Regulations do not place any obligations on landlords to do works; they simply prohibit granting a new lease after 1 April 2018 and from 1 April 2023 to continue to let with a substandard rating.
There is therefore no statutory obligation to do works which can be passed on. Pharmacists should, of course, be wary of any landlord trying to include bespoke provisions which expressly require them to carry out energy efficiency improvements or allow landlords to reclaim the cost of such works through a service charge.
The above is a general overview and we recommend that independent legal advice is sought for your specific concerns.