The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 established minimum energy efficiency standards (MEES) for residential and commercial properties.
From 1 April 2018 new regulations came into force in England and Wales which impact on rented buildings. Carbon dioxide emissions from all buildings must be ‘close to zero’ by 2050 and UK buildings will need to reach energy efficiency standards close to an “A” EPC rating.
Landlords of buildings within the scope of the MEES regulations are no longer able to renew existing tenancies or grant new tenancies if the building has less than the minimum EPC rating of “E”, unless they fall into one of the exempted categories. Properties that do not comply will have to have works to improve the energy performance of the building to a rating of “E” or above or face civil penalties.
Do MEES regulations apply to you?
MEES regulations apply to all properties requiring an EPC, including all residential tenancies let under:
- Assured Tenancies
- Assured Shorthold Tenancies
- Rent Act Tenancies
- Any other tenancy specified by an order of the Secretary of State from time to time
MEES regulations exemptions
Buildings that do not require an EPC:
- Industrials sites
- Non-residential agricultural buildings with a low energy demand
- Certain listed buildings
- Temporary properties
- Holiday lets
- Buildings where the EPC is over 10 years old or where there is no EPC
- Tenancies of less than 6 months
- Tenancies of over 99 years
What are the exemptions?
There are some circumstances where a property can be let with an EPC rating below “E”, including where:
- Third-party consent is denied. This applies where consent from a person, such as a tenant, a superior landlord or planning authority, is refused meaning the landlord cannot reasonably comply.
- Energy efficiency improvements would negatively impact the value of the property.
- All possible improvements at no upfront cost to the landlord have been undertaken, but the building is still below an “E” rating.
Exemptions are only valid for five years and cannot be transferred to a new landlord. If a landlord considers an exemption allows them to continue to let a sub-standard property below the MEES, they or their agent must provide evidence of the exemption to The PRS (Private Rented Sector) Exemptions Register.
Penalties for non-compliance
If a let property is found to be in breach of the MEES regulations and a penalty is imposed, the lease between the landlord and the tenant remains valid and in force.
Where the breach is for less than three months, the fines will be:
- Commercial properties – the equivalent of 10% of the rateable value, subject to a minimum penalty of £5,000 and a maximum penalty of £50,000
- Residential properties – the equivalent of 10% of the rateable value, subject to a maximum penalty of £2,000
Where the breach is for more than three months, the fines will be:
- Commercial properties – the equivalent of 20% of the rateable value, subject to a minimum penalty of £10,000 and a maximum penalty of £150,000
- Residential properties – the equivalent of 20% of the rateable value, subject to a maximum penalty of £4,000
If you breach a MEES Regulations, the breach will be published on the Exemptions Register for a minimum of 12 months.
What can you do now?
To avoid any financial loss MEES regulations encourage ‘environmentally friendly’ leases that could ultimately result in lower building running costs, benefiting everyone involved.
It is advised that you look at your property portfolios now to determine which properties may be affected by the change in regulations and whether any exemptions may apply to you.
You may also want to consider incorporating any energy efficient changes in your maintenance plans and whether any additional costs can be passed on to tenants.
Before granting any new leases, check the wording of your lease agreements. You might want to consider excluding any requirement for you to give tenants consent to make property alterations if those changes would diminish the building EPC rating.
For specific advice on how these changes might affect your properties or lease agreements, contact our expert conveyanicng team.