‘The Minimum Energy Efficiency Standards’ (“MEES”) have been brought into effect by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 which has implications for landlords.
From 1 April 2018, MEES makes it unlawful to let out residential or commercial premises which have an Energy Performance Certificate (EPC) rating of F or G (“a Sub-Standard Property”).
Residential and commercial leases are treated differently; however, both are dealt with by way of two phases.
From 1 April 2018, it will be unlawful for a landlord to grant to a tenant a new residential or commercial lease of a Sub-Standard Property.
Whilst any existing leases of a Sub-Standard Property will not initially be affected, they will be caught at a later date if they remain continuing:
- From 1 April 2020 it will be unlawful for a landlord to continue to let residential leases of a Sub-Standard Property; and
- From 1 April 2020 it will be unlawful for a landlord to continue to let commercial leases of a Sub-Standard Property.
Will every tenancy be caught by MEES?
Not all tenancies will be caught by MEES and the requirements are different depending on whether or not it is a residential or commercial tenancy.
Generally, properties that do not require an EPC are exempt from MEES. These can include, but not limited to, single units in ‘HMO’s, places of religious worship, industrial sites, some listed buildings and properties occupied under a genuine licence.
In terms of residential leases, ‘assured tenancies’ (including assured shorthold tenancies) and ‘regulated tenancies’ are largely caught by MEES. Long leaseholds will be caught by MEES as long as they can be classified as being assured or assured shorthold tenancies. For example, long leaseholds with very low ground rent of under £250 per annum (or £1,000 if within Greater London), or very high ground rent of over £100,000 per annum, cannot be classified as assured or assured shorthold tenancies and are therefore not caught by MEES.
With regard to commercial leases, various leases will not be caught, such as but not limited to leases that are longer than 99 years or those that are shorter than 6 months (for which there is no right to renew or extend).
Landlords – what will this practically mean for leases caught by MEES?
If you are a landlord with a residential or commercial lease of a Sub-Standard property caught by MEES, then you will be required to carry out improvements to the property to ensure that it has a minimum EPC rating of E. Recommendations as to steps to take to make a property more energy efficient will be found in the EPC itself. MEES is not concerned with how the landlord improves the property, only that the EPC rating is at least an E.
Whilst it was initially the intention for a Green Deal financial scheme to be set up to assist landlords to fund the cost of improvements, this no longer seems to be happening and so landlords will need to cover the cost of the improvements themselves.
Having stated the above, a landlord may still be able to rent a Sub-Standard Property if various situations arise, which include, but are not limited to the following:
- The recommended improvements have been carried out and the property is still a Sub-Standard Property;
- The recommended improvements would devalue the market value of the property in question;
- Where 3rd party consent to carry out the recommended improvements is required and where, despite reasonable attempts to obtain the consent, none is forthcoming;
Where a landlord considers that an exemption arises, a landlord must provide details of the same on a centralised self-certification register, the PRS Exemptions Register, which will be accessible to the public. The landlord must also submit evidence in support of the exemption relied upon.
The exemptions will mostly last for a period of 5 years, after which the landlord is again expected to try and improve the EPC rating.
Where a landlord of a Sub-Standard Property rents it out after 1 April 2018 (or continues to rent it out after 1 April 2020 or 2023 in the case of commercial premises) without having a valid and registered exemption, then the relevant Local Authority will have the power to serve compliance notices up to 12 months after the suspected breach. The Local Authority can also impose fines of up to £4,000 in relation to residential leases and £150,000 in relation to commercial leases.
It will be important for landlords to revisit any valid EPCs they have and to review the EPC rating of the property they are letting, or intend to let. If the property is a Sub-Standard Property, then various considerations will need to be taken into account, including whether the property is caught by MEES in the first instance and, if so, whether any exemptions may apply. Given the powers of enforcement available to local authorities, it is certainly important for landlords to ensure that they are letting their properties lawfully from 1 April 2018 and thereafter.
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