A guide to registering exemptions under the Minimum Energy Efficiency Standard (MEES) was published recently.
The MEES was introduced by regulations made under the Energy Act 2011 and came into force on 1 April 2018. MEES creates a new legal requirement for a minimum standard of energy efficiency in private rented buildings and is therefore relevant to anyone who lets commercial or residential property, with the exception of some public sector housing.
Property that has been sold or let since 2008 requires an Energy Performance Certificate (EPC). EPC ratings range from A to G, with A the most efficient and G the least efficient.
Where a property has an EPC rating of F or G (which is described in the regulations as sub-standard), MEES provides that a landlord cannot grant or renew a lease of that property without either carrying out sufficient energy efficiency improvements to bring the property to at least an E rating, or registering an exemption on the exemptions register. Penalties for non-compliance are substantial, and can be as high as £150,000.
Currently, MEES applies only on the grant or renewal of a lease. However, from 1 April 2020 (in the case of residential properties) or 1 April 2023 (in the case of commercial properties), MEES will apply where a landlord continues to let a property. Effectively this means that by the relevant date, landlords will need to bring sub-standard properties up to an EPC rating of E or higher, or register an exemption.
A number of exemptions are available. The majority of them are valid for only five years, and only once the exemption has been registered in the exemptions register. The exemptions that are expected to be used most commonly are:
- Cost-effective improvements: all cost-effective energy efficiency improvements have been carried out (or there are none that can be made) and the property remains sub-standard. For this purpose, cost-effective means that improvements pay for themselves within seven years, based on a formula in the MEES regulations. This exemption applies only to commercial properties.
- No funding is available: the improvements cannot be wholly financed at no cost to the landlord. This exemption applies only to residential properties. It is likely that this exemption will be withdrawn with effect from 1 April 2019, from which time landlords of residential properties will be required to spend up to a prescribed sum of their own money per property to bring it up to an E rating. The prescribed sum has not yet been announced. In a recent consultation, the government suggested £2,500.
- Devaluation: an independent surveyor states that making energy efficiency improvements would reduce a property's value by more than 5%.
- Consent is not available: the tenant itself, or a third party, refuses to consent to the energy efficiency improvements.
In addition, from 1 April 2020 or 1 April 2023 (for residential and commercial properties respectively), there is a temporary exemption of six months for new owners.
Each of these exemptions comes with conditions that need to be carefully checked and complied with.
Registering an exemption
Exemptions need to be registered before a lease is granted or, for the 2020 and 2023 deadlines, before the deadline, since from that date the landlord will be continuing to let the property.
The exemptions register is online at https://prsregister.beis.gov.uk.
To register an exemption, users need first to register as a landlord or as an agent. It is then necessary to complete the information required for each specific exemption. The new guidance from the government summarises the information that is required.
The following information is required for all exemptions:
- the property's address;
- the type of exemption being registered;
- a copy of a valid EPC for the property.
It may also be necessary to include supporting documentation as evidence that an exemption applies. For example, correspondence with tenants or a report from a surveyor may be needed.
Anyone is entitled to search the exemptions register, so some of the information that has been lodged will effectively be public knowledge. This includes the address of a property, so it is possible that registering an exemption may taint a property. It also includes the names of landlords of exempt properties where the landlord is not an individual person. A landlord might decide - depending on the circumstances - that it is preferable to carry out works to bring a property up to an E rating even if an exemption is available, to avoid the property appearing on the exemptions register.