Green Lease Drafting and Unlocking the MEES Benefits

As the UK continues to focus on environmental sustainability, one such regulation is reshaping the landscape for owners of commercial property.

The Minimum Energy Efficiency Standards (MEES) brings compliance implications and increased investment, but it also offers an opportunity for property owners to enhance their asset portfolio.

Climate change risks impacting UK property

MEES isn’t something new but there are numerous additional risks that might affect the use, occupancy costs and value of a property during the term of a lease as the UK’s regulatory and legislative agenda shifts to support the transition to a net zero economy in 2050.?

From April 2027 (which will come around soon than you think!) all rented commercial buildings must meet an EPC of ‘C’ or above. There are some limited exemptions available. Then, by 2030, the government have a target for the rating of all leased commercial buildings to be rated ‘B’ or above.

Failure to comply can lead to significant financial penalties and restrictions on your property transactions. Owners must ensure that their buildings meet the required EPC rating to avoid fines and loss of income from being unable to let their premises.

Unlock the hidden benefits

There’s no escaping MEES compliance, (unless you lease out a building that is listed, temporary, smaller than 50sqm or an agricultural building that doesn’t use much energy) so, how can you make strategic use of the regulations to enhance your property portfolio?

1. Remain Marketable

Whilst it may feel like a financial burden having to make adjustments to your property, think of it as an opportunity to remain in the market. Energy-efficient buildings command higher rents and attract environmentally conscious tenants.

2. Save Operational Costs

Energy-efficient buildings typically have lower operating costs due to reduced energy consumption or wastage. Upgrading and implementing energy-saving measures will improve your EPC ratings and the short-term effort will translate into long-term cost savings.

3. Attract New Tenants

In today’s market, good tenants are difficult to secure. Tenants are prioritising sustainability and energy efficiency. Marketing yourself as a sustainable option could widen the net of potential tenants.

4. Future Proof Your Investment

MEES is not going to go away. Taking steps to jump straight to an A or B rated EPC now will mitigate risks for the next few years.

5. Contribute to a Sustainable Future

By exceeding rather than complying, or complying earlier than you legally need to, commercial landlords are doing their bit to remain ethically responsible for the future generations.

Prioritising environmental concerns is not just a legal obligation, but a strategic imperative for long-term success. We would therefore be keen to discuss how green provisions can be introduced into the leases that you may be planning or negotiating.

Many of our clients are now using a blend of green lease provisions to suit their current needs and their plans to increase their climate ambitions. Indeed, whilst it is not yet common practice, where a lease is already in place, the parties can enter into a memorandum of understanding to provide a road-map for co-operation between the parties on increasing the sustainability of the property.

What’s our strategy?

We understand the importance of aligning regulatory compliance with commercially sensible decisions.

As businesses adopt Net Zero strategies and evolve their ESG policies, the demand for green leases may increase in response to changes in legislation, regulation or the practice of insurers mortgage lenders and other stakeholders in the property market. We are here to help commercially minded property owners to navigate the complexities, anticipate future changes and consider opportunities.

For further information on our comprehensive commercial property offering, please call us on 01206 574431 or email us at [email protected].

Alex Butler-Zagni