Forced financing to pay for HVAC Upgrades

Forced financing to pay for HVAC Upgrades

There is new legislation requiring landlords of commercial buildings to meet minimum energy efficiency standards in order to be rented. Known as MEES (Minimum Energy Efficiency Standard), it requires all buildings to have the new MEES EPC rating of B by 2030.

According to the UK government, improving buildings energy efficiency is one of the most cost-effective ways in which businesses can reduce their energy use and lower the associated bills in the buildings they occupy. I doubt if anyone disputes that, however that can potentially mean a huge cost.

Energy Efficiency Legislation

Legislation introduced on the 1st of April 2023 also now prohibits landlords from leasing commercial buildings with an EPC rating of ‘F’ or lower. The regulations not only prohibit non-domestic landlords from granting new tenancies if the building has an EPC rating below E, but now also apply to existing tenancies as well.

To make matters worse and force them into making those improvements Landlords of properties with a lower rating must improve the energy efficiency of those buildings or face financial penalties ranging from £5,000 to £150,000. Alongside these financial penalties, buildings owners potentially face a “name and shame” publication of non-compliant companies on a public register.

Commercial landlords and investors have expressed concern over the projected costs of converting their properties and real estate portfolios to EPC B ahead of the 2030 deadline. Many owners don’t have people, resources or net zero plans or possibly the capital behind them.

Typically, a reduction of between 15% and 25% can be made on energy costs by retrofitting a building with new energy-efficient technologies.

Damvent and Smart Future Tech recognise that there could be significant benefits to landlords and tenants alike with their energy efficient hybrid heat pump Air Handling units, which can not only take away a significant portion of the heating cooling loads, but can also offer 100% ventilation, and heat recovery making them the most energy efficient units available.

Replacing old inefficient Air Handling units often mean an ROI in under 5 years.

Smart Financing using future energy savings

With the high expected costs of replacements, businesses are looking for financially viable ways to make the energy-efficiency upgrade, rather than having forced financing to pay for HVAC upgrades. Specialist financiers are now offering financing packages which use future energy savings to finance buildings technology upgrades.

These financing schemes allow buildings managers to achieve equipment upgrades at low- or even zero-net-cost. In commercial offices, commonly little capital has available for retrofits either because landlords have been previously looking for maximised yield, or because energy costs are mostly passed on to the tenant.

With F- and G-rated properties no longer lettable, the threat of older underperforming HVAC assets is providing a renewed incentive for energy efficiency upgrades.

Any building rated below an EPC B rating could become unlettable if not upgraded before 2030.

The potential for these zero-net-cost HVAC Ventilation replacement projects, alongside offered by Smart Financing providers, remains considerable.

Smart Future Tech recognise that the costs of building upgrades and equipment replacements can be considerable and can offer a complete end to end solution to replacing older inefficient Ventilation systems, alongside traditional Cooling/heating plant.

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