When the UK hosted COP26 just over a year ago, it resulted in the Glasgow Climate Pact and committed the parties to it to reducing the use of coal, while promising more finance for developing countries to adapt to climate change and encouraging substantial reductions in greenhouse gas emissions.
Following COP26, the NHS has pledged to achieve net zero, with early steps in this regard including a commitment to work with suppliers to ensure that all of them ‘meet or exceed’ the NHS’s commitment on net zero emissions before the end of the decade. The effect of this is wide reaching, and the emphasis on sustainability is undoubtedly increasing across the health and social care sector.
So, how does this focus on sustainability and net zero impact property owners and occupiers in the social care sector, and what key requirements should be borne in mind when dealing with commercial properties in this climate?
Energy Efficiency from a Landlord’s perspective
For some time now the regulatory requirements surrounding the energy efficiency of buildings have been increasing. Most building owners and landlords are familiar with the EPB Regulations 2012 (under which the energy performance of buildings is regulated), having been living with the regime for more than a decade. There is a well-established market of providers of Energy Performance Certificates and the accompanying Recommendation Reports. The UK has retained the EPB Regulations following the Brexit Withdrawal Agreement. Under the current EPB Regulations, existing buildings ought to be nearly zero-energy by 2050 which means the building has very high energy performance with most of the energy used coming from renewable sources.
Less familiar to some, is the coming expansion of the minimum standard to let commercial buildings. Currently, a property which will be the subject of a new or a renewal tenancy must be rated a minimum of ‘E’ under the MEES regime but by April 2023 this will be expanded so that all new and existing tenancies must benefit from a minimum E rating.
Some tenancies and properties are exempt from the MEES regime, but landlords should be reviewing their existing EPCs now and taking action to ensure they satisfy the minimum standard otherwise they risk not being able to let buildings that do not meet the criteria. The Government is working towards requiring a minimum EPC rating of band B by 2030 which may prove to be ambitious for much of the UK’s existing building stock
What about Owner Occupiers?
The requirement for improved EPC ratings is of significance not only to landlords. Owner occupiers looking to sell their care homes should consider the requirement for a MEES compliant EPC at the time of sale (proactive steps now would prevent delays at the time of sale) and those providing nursing care, should also be considering the NHS’s net zero ambitions and how they extend to the NHS supply chain. For those providers of residential care the increasing collaboration between the NHS and local authorities evidenced by the introduction of the Integrated Care Boards means that the impact of the NHS’s net zero ambitions will likely be felt more broadly. NHS Cheshire and Merseyside ICB for example, has a Green Deal Plan which identifies ambitions to collaborate with ‘supply chain partners to reduce emissions and produce greener alternatives’.
The increasing emphasis on energy efficiency and sustainability is not the only challenge facing care home providers, as many also grapple with the impact of the rising energy costs, which is being felt acutely across the health and social care sector in particular.
What can you do?
Taking steps to improve the efficiency of the health and social care estate now, would both work towards achieving net zero targets, and compliance with regulatory requirements which will assist in future property transactions & business sales, where a MEES compliant EPC will be required.
It is also possible that the requirements of the MEES regime (although requiring upfront costs to improve the energy efficient of ‘substandard’ buildings) could help to tackle the challenges faced by businesses struggling to keep up with increasing energy costs, by implementing measures which result in lower energy usage (and consequently, lower bills). This will be easier with new developments, where the use of sustainable materials and renewable energy sources can be considered at the outset. Retro fitting operational buildings however, will pose many practical challenges, but is the pay off worth the initial pain?
For further information, please contact:
Emma Brecknock, Partner, Hill Dickinson
emma.brecknock@hilldickinson.com
