Commercial EPC and MEES on a mixed-use property

What a commercial EPC is

An Energy Performance Certificate rates a building's energy efficiency from A to G and is required whenever a property is built, sold or let. A commercial or non-domestic EPC covers the commercial unit; a separate domestic EPC covers any self-contained residential accommodation. A mixed-use property therefore often carries two certificates rather than one.

Each Energy Performance Certificate is valid for ten years. The commercial unit's certificate is produced by an accredited non-domestic energy assessor, the flat's by a domestic assessor, and the rating sits behind the headline letter on a numeric scale. Small changes to lighting, heating or insulation can move a unit across a band, which is how owners improve a poor rating.

Which rules apply where you are

Energy Performance Certificates are required across the United Kingdom, but the Minimum Energy Efficiency Standards described here are the England and Wales rules. Scotland runs its own scheme, with energy assessments and improvement requirements set under Scottish regulations, and Northern Ireland operates separately again.

If your mixed-use property is in Scotland or Northern Ireland, treat the E floor as a useful benchmark but confirm the local requirement, because the enforcement regime and the timetable differ from England and Wales.

What a commercial EPC assessment covers

A commercial EPC assessment looks at the whole building, not just the meter. A non-domestic energy assessor surveys the building fabric and insulation, the heating and hot water systems, the lighting, and any air conditioning, then runs the figures through the SBEM calculation, the standard model behind a non-domestic Energy Performance Certificate. The output is the EPC rating, the A to G letter that decides whether the commercial unit meets the Minimum Energy Efficiency Standards.

Air conditioning counts twice. It feeds the energy performance rating, and larger air conditioning systems carry a separate inspection requirement of their own. Older buildings with poor insulation, dated heating systems and inefficient lighting tend to score worst on energy, which is why period high street buildings, the classic mixed-use asset, so often sit at the lower EPC ratings.

Booking the assessment early is worth it. A commercial EPC assessor can only rate what is in place on the day, so an accredited energy assessor visiting before you complete gives you the true commercial EPC position and a list of measures under the regulations, rather than a surprise after purchase. Ask the assessor specifically about the heating systems and any air conditioning, as these usually drive the commercial EPC rating most.

What MEES requires today

The Minimum Energy Efficiency Standards set the lowest rating at which a property can be let. For commercial property the standard has tightened in two steps:

• From April 2018: a landlord could not grant a new commercial lease on a unit rated F or G
• From April 2023: a landlord cannot continue to let a commercial unit rated F or G, even on an existing lease

For the residential flat, domestic MEES has required a minimum of EPC E on existing tenancies since April 2020. In practice this means every lettable part of a typical mixed-use property must reach at least E to produce rent lawfully.

Where the standard is heading

The government has consulted on raising the commercial minimum to EPC C and then B later this decade, and on lifting the domestic minimum to C for new tenancies. These are proposals, and the dates have moved, so they are not yet law. The direction of travel is clear even if the timetable is not, and buyers of older mixed-use stock should price in the cost of getting the commercial unit to a higher band.

How to improve a commercial EPC rating

Where a commercial unit falls below the standard, the rating can usually be improved. Common measures a non-domestic energy assessor will flag include upgrading the lighting to LED, improving insulation, replacing dated heating and air conditioning systems with efficient units, and adding controls so the building only draws energy when it needs to. Each measure lifts the energy performance and can move the EPC rating up a band or more.

Improving the rating is not only about compliance. Better energy performance cuts the running costs a tenant pays, which supports the rent and the value, and it future-proofs the building against the rising energy efficiency standards. A stronger EPC rating also reassures lenders that the asset will stay lettable, which widens the panel and can sharpen the rate.

Where the work is substantial, refurbishment finance funds the improvements and we size that facility alongside the term loan, so the building reaches a compliant EPC rating and a keener energy performance without stalling the purchase.

Exemptions and exceptions

Some situations fall outside the standard or qualify for a registered exemption, including:

• Buildings that do not require an EPC at all, such as certain listed buildings where improvements would unacceptably alter them
• The seven-year payback exemption, where the cost of improvements would not pay back in energy savings within seven years
• Cases where a third party, such as a tenant or planning authority, refuses consent to the works
• Cases where the works would devalue the property by more than five percent

Exemptions must be registered on the PRS Exemptions Register and generally last five years. They are not automatic, and an unregistered sub-E letting can draw a financial penalty.

Why the EPC affects your finance

Lenders look at the EPC because it governs whether the asset can produce rent. A sub-E commercial unit cannot be lawfully let, so the rent that underpins the loan disappears, and several lenders now decline or cap the loan to value on poorly rated stock. Others price it more keenly when the rating is strong, treating a good EPC as a sign of a resilient asset.

Where a property needs work to reach the standard, the route is usually a refurbishment or bridge facility to fund the upgrade, then a term semi-commercial mortgage once the unit is compliant and let. We arrange both, and we read the EPC position into the case before it goes to a lender. We arrange finance and do not give energy or tax advice; confirm the EPC and MEES position for a specific property with a qualified assessor.

EPC

Energy Performance Certificate, the A to G rating of a building's energy efficiency, valid for ten years.

MEES

Minimum Energy Efficiency Standards, the rules setting the lowest EPC rating at which a property can be let.

Non-domestic EPC

The commercial energy certificate covering the commercial unit, as distinct from the domestic EPC for a flat.