It is now just under one year until the new Minimum Energy Efficiency Standards (or MEES) regime comes into force. From 1 April 2018, it will be unlawful for landlords to agree a new tenancy or a renewal for a property rated F or G on its energy performance certificate (EPC), unless certain exemptions apply.
Some properties may require costly energy efficiency works to bring them up to an E rating, or have to be removed from the rental market. Failure to act could lead to financial penalties and reputational damage.
The government has recently issued guidance aimed at non-domestic landlords, local weights and measures enforcement authorities and others with an interest in the non-domestic private rental sector, such as letting agents and other property management agencies.
Ten things landlords need to know about the new MEES regime:
- F and G properties aren't necessarily unlettable – if you have F or G rated properties in your portfolio, consider redoing the EPC and investigating what works could be done. It may be possible to obtain an E rating with inexpensive works.
- Band E is a minimum – but that could change in the future.
- Cost-effectiveness is key – take expert advice on whether particular improvements would be cost-effective to install. If not then you could benefit from an exemption.
- Exemptions must be registered – where a landlord believes that one of his/her properties qualifies for an exemption from the MEES, an exemption must be registered on the PRS Exemptions Register.
- But the register isn't open yet – the Exemptions Register is currently being piloted and will be available on gov.uk by 1 October 2017. However, landlords who wish to register an exemption as part of the pilot should email the BEIS minimum standards team PRSregisteraccess@beis.gov.uk. Any valid exemptions registered as part of the pilot will remain valid and will not need to be resubmitted at a later date.
- Temporary exemptions may buy you some time – a temporary exemption of six months applies for anyone buying a property subject to an existing, non-complying tenancy. The buyer has six months to either comply with MEES or establish a fresh exemption. Temporary exemptions also apply if tenancies arise by operation of law (for example, by way of a surrender and regrant) or as a result of insolvency or in some other situations.
- Leases might need to change – some landlords are prohibiting tenants from doing anything which might impair the energy efficiency of a property. For example some types of lighting are very energy intensive.
- Listed buildings require special treatment – listed buildings may in some cases be exempt from the requirement to have an EPC. However, this needs to be considered on a case-by-case basis.
- Enforcement – renting out a non-compliant property can lead to a fine of up to £150,000 (per property) and publication of the non-compliance.
- Appeals – landlord appeals will be heard by the First-tier Tribunal, part of the court system administered by Her Majesty's Courts and Tribunals Service.
Actions for landlords with large property portfolios
- Assess portfolio to establish which properties need an EPC and what current EPC ratings are:
- Plan to upgrade where an E rating is not achieved/an exemption cannot be claimed.
- Determine next steps where an E rating cannot be achieved/an exemption cannot be claimed (remove from the market or sell?).
- Deliver a programme of refurbishments/upgrades.
What impact can MEES have on occupiers?
Although most of the responsibility is placed on the landlord of a property, some impact could be felt by the occupier. The following points should be noted:
- Leases are still valid - The validity or enforceability of a lease is not affected if a landlord lets a property (or renews a lease) in breach of the MEES requirement. A landlord cannot terminate the tenancy or require the tenant to vacate because the landlord has failed to achieve the MEES requirement.
- Landlords may restrict tenant's modifications – landlords may start to impose restrictions on what modifications tenants can make to the premises, particularly if what they do might affect the EPC rating (for example energy intensive lighting).