Beginning 1 April 2018, under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (commonly referred to as the MEES Regulations), non-domestic landlords must ensure that any properties they rent out in England and Wales have an energy efficient rating of at least an E (using the A-G rating system from Energy Performance Certificates (EPCs)). This requirement will apply on the grant of a tenancy to new tenants, or a renewal with existing tenants after that date. These requirements will extend to all such properties, even where there has been no change in the tenancy arrangements, from April 2023.
The UK government has recently issued Guidance for landlords on how the MEES Regulations are expected to operate and the implications for landlords who do not meet the requirements.
If you are a landlord of non-domestic properties, then it is important act now and consider how this will affect your leased properties. Key issues to consider are:
- Which types of properties are affected. Most buildings in which energy is used to condition the indoor climate will be caught (ie those buildings for which an EPC is legally required when a property is sold or leased). Leases for less than 6 months or more than 99 years are not covered. There are a few exceptions for specific types of building, for example places of worship, but these are limited in application.
- What improvements can be made if you have properties that are rated F or G. The Guidance provides further details of how to identify ‘relevant improvements’ and to work out if they are cost effective to install. There is a seven year pay-back test which is applied to assess if a measure is a ‘relevant improvement’.
- If you have any properties which cannot be brought up to standard despite having ‘relevant improvements’, or where no cost effective measures can be identified, then you can register a 5 year exemption on the PRS Exemptions Register.
- Implications of non-compliance. Compliance notices can be served requiring information to be supplied. Financial penalties can be imposed on landlords of non-compliant properties, with potentially very high fines for long-term breaches on high value properties (because the fines can be linked to rateable value). There is also a system for publishing details of non-compliant landlords.
An in-depth analysis of which properties are affected, the importance of reviewing your portfolio, the sanctions resulting from non-compliance, and the cost and letting implications of the MEES Regulations over the coming months is provided by our real estate colleagues here: “MEES – Landlords, It’s All About You”