These make it unlawful for landlords to grant new leases or renew existing leases of “substandard” properties – those that have an energy performance certificate (EPC) rating of F or G. Penalties for non-compliance will be based on the rateable value of the property, up to a maximum of £150,000 per occasion. Landlords may need to carry out work to improve the energy performance of their buildings, unless exemptions apply.
From 1 April 2023 MEES will apply to all existing lettings and by 2030 it is expected that the minimum rating will rise from F to C. MEES will apply to pharmacists who are the landlord or if they are looking to underlet.
Pharmacist tenants will also be affected because landlords will be looking to ensure their property leases deal effectively with MEES. Leases are now likely to include:
There are clear financial implications of MEES – the potential loss of value and/or rental income for landlords and the cost of upgrading non-compliant properties for both landlords and tenants. Valuations of substandard properties are also likely to decrease and rent reviews as well as overall marketability will be affected.
However, MEES could also be an opportunity for pharmacist tenants. They may be in a better negotiating position on improvement works and benefit from reduced outgoings in a more energy efficient pharmacy and reduced rents for non-compliant pharmacies.
This is a general overview and we recommend that independent legal advice is sought for your specific concerns.
Michelle Noble is a solicitor in the pharmacy team at Charles Russell Speechlys LLP.