The MEES were introduced earlier this year by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the “Regulations”). As part of the Regulations, from 1 April 2018 landlords of buildings within the scope of the Regulations must not grant or renew existing tenancies if the building has less than the prescribed minimum energy performance certificate rating of E. From 1 April 2023 landlords will be prohibited from continuing to let out such properties (this will apply from 1 April 2020 for privately rented properties).
The Regulations will apply to most buildings in England and Wales, but will not apply to:
- buildings which are not required to have a EPC at the moment (e.g. certain listed buildings)
- buildings where the EPC is over 10 years old (or where there is no EPC)
- tenancies of over 99 years, and
- tenancies of less than six months (provided that there is no right of renewal).
Whether or not the Regulations will apply to a building is not always clear cut. ‘Guidance for Landlords’ was provided by the Government in February of this year (which can be found by clicking here), and is intended to help landlords meet their MEES obligations (but is not legally binding).
Certain buildings are exempt from the Regulations, and if applicable, landlords can let these buildings below the minimum standard of E:
- if an independent assessor determines that all relevant energy efficiency improvements have been made to the property, or that improvements that could be made but have not been made would not pay for themselves through energy saving within seven years;
- where an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%;
- where consent from a third party is refused or where conditions have been attached to the consent with which the landlord cannot reasonably comply.
If an exemption is sought, the landlord must register for the PRS Exemptions Register (PER), which opened on 1 April 2017. These exemptions are for five years only and cannot be transferred to a new landlord.
Beware the penalties!
Fines for not complying with the Regulations range from £5,000 or 10% of the rateable value of the property (up to £50,000); whichever is greater, if the period of non-compliance is less than three months. If greater than three months, fines are the greater of £10,000 or 20% of the rateable value (up to a maximum of £150,000). There is also a publication penalty for landlords.
Action to take
- Landlords should audit their portfolios and determine which properties are within the scope of the Regulations and whether any exemptions apply.
- Landlords should also carry out assessments to check if the EPC rating for their properties is correct.
- Landlords should work out how their leases fit in to the timetable for the regulations – check termination dates, break dates and renewal dates, and review leases to ensure that any required improvements are properly accounted for within the drafting.