Most commercial landlords are sleepwalking into MEES non-compliance, unaware of recent EPC changes, without a plan to reach band B, and missing out on green finance and value uplift.

That’s the findings from Murton & Co’s Non-Domestic MEES Compliance Scorecard which we have been running for a few months now, and aims to help landlords de-risk assets, unlock green finance, improve tenant appeal, and position for stronger long-term returns by incorporating both the current MEES threshold (EPC band E) and the potential future threshold (which I reckon will be EPC band B from 2031).

We’ve crunched the numbers and come up with some worrying results. As the sector prepares for phase two of non-domestic minimum energy efficiency standards, it’s a concern that so many people don’t understand their importance. Our insights reveal that three-quarters of clients and potential clients who filled in the survey in the last 30 days are unsure if their properties even meet current MEES standards and haven’t reviewed them, while one-third aren’t aware of the likely 2031 deadline for commercial properties. Looking at the stats from when we launched the scorecard, the story is very similar.

 

While two-thirds of landlords have no roadmap for making any necessary improvements, most fail to market their energy credentials, and few engage with tenants around energy efficiency. They face significant gaps in compliance, planning and market engagement that leave them exposed to regulatory, financial and competitive risk, creating a perfect storm of regulatory risk, lost income potential and declining asset competitiveness.

None of the respondents had formally conducted a cost-benefit analysis of energy efficiency upgrades – to ensure every pound invested delivers maximum financial, legal, and reputational benefits – while reducing long-term energy costs. One-third weren’t convinced that improving an EPC rating improves competitiveness and market value – when reading Murton & Co’s case studies regarding Gilmour Engineering and K&M Energy proves that’s exactly what happens.

Our findings also reveal that none of those who completed the scorecard understand MEES emptions which, if they fall foul of these rules, could mean a significant risk to their business, potentially leading to non-compliance and a potential fine.

The majority (75%) also fail to leverage energy credentials when marketing properties, missing the chance to attract sustainability-focused tenants and investors. Half haven’t proactively discussed better EPC ratings with tenants and the other half haven’t even considered it. Meanwhile half haven’t made any tenant-focused improvements, and the other half have only made upgrades when legally required. A good EPC can impact letting speed, tenant quality and lease terms, yet three-quarters of respondents haven’t realised this.

Aside from not taking tenants into account when thinking about spending on improvements, our scorecard respondents are also failing to capitalise on green finance options. There are plenty of green loans and mortgages out there but 25% had limited awareness of these and 75% of respondents either haven’t talked to their lenders about MEES or didn’t even know about them. That’s a worry. While a poor EPC rating can hamper landlords’ chances of getting financing – as many lenders base their decision on anticipated retrofit costs – this lack of communication could lead them to miss out on even more opportunities for green financing as regulations tighten.

However, it isn’t all doom and gloom as a quarter of respondents are actively including their properties’ energy efficiency credentials in their core pitch to tenants and investors – a sensible move as this will make their assets more attractive both to tenants looking to cut costs and investors seeking secure, future-proof holdings.

Although we’re still waiting for the government to announce the deadline for commercial properties to reach band B – which will hopefully come in the autumn – the key takeaway from our scorecard research so far is that people need to start understanding what’s expected of them – and fast.

Our online test helps by identifying which of the four categories – MEES Regulations & Legal Compliance, Financial Implications, Asset Value & Market Competitiveness, Investment & Occupier Appeal – needs the most urgent attention. Depending on the responses, it recommends actions including immediate upgrades and quick wins as well as general guidance on exemption advice, information about Energy Assessors and useful software. It also provides prompts to conduct a Cost-Benefit Analysis to compare the upfront costs of energy efficiency improvements against the projected increase in property value and income. After filling in the quiz, you’ll get a tailored report with personalised score using a traffic light system to show where you’re at on your compliance journey, while highlighting at-risk assets, helping you take a costed, phased approach.

Don’t wait until energy efficiency improvements become mandatory, try out the scorecard – and if you need us, we’re here to help.

Email: enquiries@murtonandco.uk
Call: 01524 548313