CLS Holdings has fully mitigated its UK portfolio against the Government’s upcoming Minimum Energy Efficiency Standards (MEES), which come into force from 2018. The CLS Holdings Sustainability team worked in partnership with EPC assessors to review properties at risk, providing assessors with complete information, giving them full access to properties and upgrading equipment where needed. All UK properties now have Energy Performance Certificate (EPC) ratings of D or above.
100% OF UK PORTFOLIO COMPLIES WITH UPCOMING MEES REGULATIONS
ENHANCING INVESTOR CONFIDENCE AND PROTECTING ASSET VALUE
SAFEGUARDING RENTAL INCOME AND INCREASING APPEAL FOR OCCUPIERS
CLS Holdings is a commercial property investment company with assets in the UK, France and Germany. In line with the company’s ongoing commitment to sustainability and to mitigate MEES risks, CLS Holdings set a new internal standard in 2016 for all properties to achieve EPC ratings of D or above, both for existing assets and for new acquisitions. CLS Holdings chose to exceed upcoming MEES requirements, to futureproof the portfolio.
From 1 April 2018, MEES regulations in England and Wales will prohibit new leases and lease renewals for properties that have EPC ratings of F and G, with few exceptions. From 1 April 2023, MEES will be extended to cover all leases, including existing leases where the property is legally required to have an EPC.
Review and tender process
CLS Holdings carried out a review to assess the ratings and expiry dates of all active EPCs across its entire UK portfolio (49 properties). CLS took the approach of defining assets as ‘at risk’ where EPCs were classified below D and/or expiring before 2019, that is, a year after MEES regulations come into effect. 18 assets were identified as being at risk.
The next step was to appoint an EPC assessor:
CLS Holdings tendered the project out to three suppliers. BWS Partnership was appointed based on price, timely delivery (completion within three months) and track record.
For each building, the assessors also provided CLS Holdings with:
In addition to all the work at the property level, CLS Holdings reviewed its standard lease wording and investment policies, updating them where appropriate. In the case of leases, CLS Holdings has updated its generic terms to maintain its target of an EPC of D (100) or above in all areas of the building (including demised space) and prevent works which could have a detrimental impact on the EPC rating for the building.
On acquisition of any asset with an EPC below D, the Group Sustainability Manager is involved in decision making, to ensure that the building can be brought up to the D (100) standard if purchased by CLS Holdings.
How can information improve EPC ratings?
The overwhelming area of focus for CLS Holdings was on providing accurate, complete information to the assessors and ensuring that facilities managers gave assessors full access during site visits, e.g. access to all equipment and locked areas. Facilities managers were involved from the outset, providing information on boiler and chiller ratings, the types of glazing, air conditioning inspection reports, insulation and more. None of the F and G rated assets needed major capital expenditure works to bring them up to D. The only physical improvements were lighting upgrades in three buildings. The negative impact of defaults and assumptions on EPC ratings can be underestimated. When assessors are submitting documents, they need to be confident that everything is accurate. If they cannot gain the necessary information or access, they cautiously underestimate. As a result, a building that could have achieved a D rating, is instead rated F or G.
How can a partnership approach improve EPC ratings?
The CLS Holdings sustainability team and facilities managers worked in partnership with the EPC assessors, reviewing drafts together. When CLS Holdings received draft EPCs below D, they worked with the assessor to understand what was needed to improve performance. For example, if an assessor said an E rating was due to halogen lighting, the sustainability team quickly got agreement from the asset management team to invest in lighting upgrades, typically £1,000 - £5,000. The assessors then updated the EPC and the rating would improve. Rowan Packer, Group Sustainability Manager at CLS Holdings, explains: “Pricing tends to be very competitive for EPCs, so assessors want to complete assessments as quickly and easily as possible, which is difficult if you do not engage at a detailed level. When you work in partnership with assessors, you are much more likely to get good EPC ratings. Working in partnership means that assessors have all the information and access they need, and you gain insights from them that enable you to improve the rating before the EPC is finalised and lodged. It is worth building a relationship with your EPC assessment partner and working with them across multiple projects.”
Find out more
Group Sustainability Manager
Simon Wigzell, Head of Group Property at CLS Holdings plc
“CLS Holdings is delighted to be the first listed property investment company to declare 100% compliance against the upcoming Minimum Energy Efficiency Standards. This is a great achievement, giving peace of mind to investors and occupiers that all our UK properties are ready for the latest efficiency regulations.”