On 1 April 2018, the Minimum Energy Efficiency Standards (MEES) made it unlawful for landlords to grant or renew a lease on a property that has an EPC rating worse than E. Despite estimations that 65% of commercial property is at risk of noncompliance, insufficient has been done, generally, by landlords to improve the energy standard of their properties. Simply put, many are unaware of MEES or the fine they could face.
Failure to reach an EPC rating of E could currently result in a fine of £150,000, but in a few years this situation is going to get even more strict. By 2023, all commercial buildings must comply whether a lease is new or ongoing. There are suggestions, such as by the government’s Clean Growth Strategy 2017, that by 2030 the minimum rating of E will be pushed to C. Landlords will have to make even more significant improvements to their properties.
The good news is there are many initiatives and strategies that can be implemented to improve the EPC rating of a property. Today’s materials and technologies mean this doesn’t have to cost the earth, but it might well help save it.
An increased focus on real estate
In 2016, the UK’s total greenhouse gas emissions fell by 6% to 466 million tonnes of CO2 equivalent. However, the emissions from buildings are increasing. Focusing on commercial property, the International Panel for Climate Change estimates that the energy used to heat and power buildings accounts for 12% of the UK’s total carbon dioxide emissions.
Until MEES came into force, the UK commercial sector was largely unregulated in terms of carbon emissions. As a result, energy consumption has increased much more quickly in commercial property than in domestic property. MEES is the government’s reaction, aimed to curb commercial property’s impact on the environment as fast as possible.
The main problem facing UK landlords is the age of commercial properties. The Technical Strategy Board estimates that 85% of existing buildings will still be used in 2050. Energy demand is set to rise, which highlights the need for innovative and new technologies to improve the energy efficiency of increasingly outdated buildings.
LSH has been advising landlords on how to improve the EPC rating their properties for many years. Our team has observed how the technology and training behind EPC assessments have become much more stringent since they were first introduced in 2008, which means the number of properties deemed to be substandard has increased. A landlord may believe their property is compliant, but when a new assessment is carried out it could fail.
The answer is to act before you are forced to. By taking steps to reduce energy emissions now, a landlord will be fully prepared when the next EPC assessment is due.
What can a landlord do?
Retrofitting existing buildings has become the name of the game. The most effective way to improve the EPC rating is to focus on installing a high-performance building envelope, efficient lighting and heating, ventilation and air conditioning and, importantly, greater controls.
For example, lighting can account for almost 16% of energy use and 25% of CO2 emissions in a typical office building. Updating lighting systems to more efficient bulbs could make a real difference. Installing better system controls overall could also be the answer, as a lot of energy is wasted when heating or lighting is used outside office hours. Occupancy sensors have improved hugely in the last few years, becoming an affordable solution for buildings of all sizes.
The very fabric of the building needs to be addressed, however. Roughly a third of the UK’s commercial properties were built before the 1940s, so are likely to be built from solid wall construction which is highly susceptible to thermal leakage. The best way to counteract this is to install thermal insulation. Windows also need to be addressed, either by replacing windows with better-performing glazing or coating existing glazing in a low-emissivity coating.
Landlords need to look upwards as well as outwards; approximately 22% of heat loss in a typical office building is expected to occur through the roof, according to The Carbon Trust. In the summer, poorly insulated roofs can cause overheating internally and increase the need for air conditioning. Again, good quality insulation is the answer.
Of course, every property is different. While one option might suit one property, it might not provide the best solution for another. LSH has been working with landlords across a wide range of properties and can help to assess a property to determine the best solution to MEES in any specific situation. We can help landlords to identify low-cost, effective solutions to reduce consumption that are future proofed against legislation changes.
Improving a property’s EPC rating doesn’t just result in compliance; the landlord or tenant will benefit from reduced running costs as well as a more comfortable environment. The time to act is now, before noncompliance really hits the bottom line.
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