What are the upcoming changes to the MEES for commercial & residential property.
- From the 1st April 2023 – all rented commercial properties (including those in the middle of lease terms) will need an EPC of E or higher.
- April 2025 – all non-domestic rented buildings will need a valid EPC.
- April 2027 – all non-domestic properties will need a C or higher
- April 2030 – all non-domestic properties will need a B or higher
What are the Minimum Efficiency Standards 2018?
- They apply to private rented residential and non-domestic property and is aimed at encouraging landlords and property owners to improve the efficiency of their properties by a restriction on the granting and continuation of a property which has an EPC of F or G
What is sustainability?
Sustainability is meeting the needs of the present without compromising the needs of the future
What is COP27?
UN’s 2022 Climate Change Conference
- brought governments together to accelerate global efforts to confront the climate crisis
What is the impact of having a rating of E on a commercial property?
As of April 2023 it is an offence to continue to let or sub-let a commercial property with an EPC rating of E or lower
How does MEES impact upon your role?
Have to ensure that everything built will be able to meet the minimum EPC standards
When reviewing potential opportunities that do not comply with MEES currently or will not in the future consider this in the valuation.
What are the key dates for MEES?
1st April 2023 is the key date – from this date onwards it is prohibited to let a commercial property with an EPC lower than E.
MEES has already applied to the grant of new leases or the renewal or extension of existing leases since 1 April 2018.
What falls outside of MEES?
The following buildings are not required to have an EPC:
- A place of worship
- stand-alone buildings with total useful floor space of less than 50 square metres
- Industrial units//workshops with a low energy demand (no heating or cooling)
- Building due for demolition
- Where tenancy is more than 99 years
What buildings are excepted from MEES?
- Devaluation -When devaluation case can be proven – where improvements would reduce the market value of a property by more than 5%
- 7 Year Payback Test - the necessary energy improvement works will not ‘pay for itself’ by way of energy bill savings over a 7-year period.
- Lack of consent - when third-party consent from a tenant, landlord or planning authority is refused.
What is an EPC?
An energy performance certification gives a property an energy efficiency rating from A to G and is valid for 10 years.
When do you need to display an EPC?
You must display an EPC by fixing it to your commercial building if all these apply:
-the total useful floor area is over 500 square metres
- the building is frequently visited by the public
- an EPC has already been produced for the building’s sale, rental or construction
What is included in an EPC?
An EPC contains:
* information about a property’s energy use and typical energy costs
* recommendations about how to reduce energy use and save money
An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for 10 years.
Who policies EPC’s
Local Authority Trading Standards enforce it
Tell me about lender/investor considerations in relation to sustainability?
- Prioritising sustainable assets because they will hold their long term value – avoid obsolescence
- Increased requirements to invest sustainably
Tell me about tenant considerations in relation to sustainability?
- Sustainable buildings reduce their energy costs
- Should align with their CSR strategy and sustainability goals
What is BREEAM and how does it work?
It is the Building Research Establishment’s Environmental Assessment Method.
It is a voluntary assessment tool to rate new and refurbished commerncal and residential buildings.
A buildings impact is rated by BREEAM assessors by reference to nine environmental weightings including:
- Energy consumption
- Water use
- Transport links
- Waste management Health and well-being
It is then rated from pass, good, very good, excellent to outstanding.
What other environmental tools do you know?
LEED
How will MEES affect properties going forward and how would you expect the market to change as a result?
- Impact on properties as if landlords don’t have the cap ex available properties will become obsolete – what do you do with them. Can they be used for repositioning?
- Drive a gap between properties that are sustainable assets and those with realistically a grade d or lower
What guidance note can you refer to in terms of valuation?
Sustainability and ESG guidance in commercial property valuation and strategic advice (3rd edition) 2021
Environmental risks and global real estate
Red Book Global (VPGA 8)
When was the climate change act amended and what were the changes?
2019
To require the UK to achieve net zero carbon by 2050. An interim target of reducing emissions by 78% by 2030 was introduced - require significant effort from the property industry
What’s the Green Industrial Revolution?
Announced in November 2020 by the UK gov to introduce a 10 point plan to mobilise £12 billion of government and support 250,000 jobs
What’s the Better Building Partnership pledge?
A number of UK property funds and REITS have publicly committed to achieving net zero carbon by 2050
How does the THE UK Green Building Council (Better Building Partnership framework) address the issues and rank them in actions?
- Establish a net zero carbon scope
- Reduce construction impact
- Reduce operational Energy Use
- Increase renewable energy supply
- Offset any remaining carbon
What are the 5 key provisions of the EPC regime?
Establish standards of energy conservation for new and refurbished buildings
Establishing a calculation methodology for the energy performance of all buildings
Minimum requirements for the energy performance of all buildings
Energy certification for all new buildings when leased or sold
Mandatory inspection of boilers and AC
