The Government’s response to the consultation is expected later this year, with amendments to the PRS Regulations to be implemented from 1^stApril 2025.

The consultation was aimed at improving 3 main areas:

1. Improving Implementation

• A phased implementation of new minimum EPC targets of band C by 2027 and band B by 2030. EPC band B by 2030 is set out in the Energy White Paper 2020, so there should be no confusion that by 2030 all commercial buildings should meet the minimum energy efficiency standards of EPC band B.
• Introduction of a 2-year Compliance Window – please refer to the chart below which is taken from the Consultation document.

• Continuous EPC on leased properties. Currently the Energy Performance of Buildings Regulations sets out the legal requirement for when an EPC is required. These triggers will remain (i.e. on sale, let and construction), but the MEES Regulations will introduce a requirement for EPCs to be renewed when it expires and when material changes to the building are undertaken. There has been a growing trend over the past 2 years of landlords introducing conditions relating to EPC ratings, when considering tenant alterations so this should not cause significant concern or incumbrance.
• Introduction of a 7-year payback test calculator as an alternative to the requirement for 3 quotations when applying for an exemption to implementing relevant energy efficiency improvement measures. The test will include an assessment of a package of measures rather than be limited to a single measure. The context to this being that a single measure may not pay back within 7 years but coupled with other measures, it may and hence all the measures in the package will need to be implemented and wouldn’t be eligible for an exemption.
• Shell and core buildings to be given a 6-month exemption to comply. A tenant must be in occupation for at least 6 months before compliance action can be taken. The current EPC Convention when assessing a shell and core building is to include energy intensive building services (i.e. space heating, hot water and lighting), which will inevitably result in a poor EPC rating potentially below the minimum standards. The knock-on effect of this being that the landlord cannot let the building. Tenant fit-out of an existing building is not evaluated for the EPC. Only the fit out of the first tenant following completion of the construction of a new build is evaluated for energy efficiency as part of the Building Regulations process. The aim of this proposal is therefore to allow the landlord and tenant to work together to achieve compliance. This should be a welcome amendment. Since there is a growing trend by landlords to introduce clauses into the lease whereby the tenant fit-out or alterations must achieve a particular EPC rating, it’s unlikely this amendment will be resisted.

2. Improving enforcement

• A consistent approach to enforcement of the regulating, including the introduction of the 2-year compliance window and for landlords to ensure their buildings have a valid EPC at all times aims to improve the compliance and hence enforcement of the Regulations.
• A year-long study was undertaken by BEIS which identified that enforcement of MEES was stifled by the fact that data on leasehold transactions are not readily available and time-consuming to obtain. It is perhaps surprising for those in the property sector that it took the government so long to establish this, but perhaps it does show the significance they place on these regulations.

3. Ensure the policy can be delivered in practice

• Coupled with changes to the MEES Regulations we are expecting changes to the calculation methodologies that produce the EPC, including updates to Building Regulations Part L and fuel factors.
• There is increasing pressure on Property, Asset and Facilities Managers to deliver on owner and occupier sustainability aspirations as well as meeting regulatory compliance. 2022 is going to be a significant year for energy efficiency and as stated in previous newsletters, it is important to get professional advice before undertaking works or develop strategies to achieve compliance and aspirational targets.

If you have any questions about the changing regulations, please get in touch with us.