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Another regulatory burden for landlords – Minimum Energy Efficiency Standards (MEES)

17 Feb 2017

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 introduce minimum energy efficiency requirements which landlords of most domestic and commercial properties in the private rented sector (“PRS”) in England and Wales will need to comply with.

Restrictions on letting substandard properties (“The Restrictions”)

Subject to various exceptions and exemptions, the Regulations require affected properties to have an Energy Performance Certificate (EPC) rating of “E” or higher.

From 1 April 2018, it will be an offence to grant a new tenancy, or to extend or renew an existing tenancy of such a property with an EPC rating of below E. From 1 April 2020 (for domestic properties) and 1 April 2023 (for non-domestic properties) it will be an offence to continue to let such a property on an existing tenancy.

Enforcement

Trading standards officers (“TSOs”) will be responsible for enforcement and may serve compliance notices on landlords requiring the provision of information where they suspect a breach.

From 1 April 2018, TSOs can penalise landlords who breach the Restrictions or who fail to respond to a compliance notice. The penalties include publication of details of breaches and potential fines:

  • For a breach of less than 3 months, you can be fined up to £2,000.00 for a domestic property and the greater of £5,000.00 or 10% of rateable value (up to £50,000.00) for a commercial property;
  • For a breach of 3 months or more, you can be fined up to £4,000.00 for a domestic property and the greater of £10,000.00 or 20% of rateable value (up to £150,000.00) for a commercial property.

Financial and publication penalties also apply for registering false or misleading information on the PRS exemptions register.

Exceptions and Exemptions

Various exceptions and exemptions will apply. Short commercial property leases of less than 6 months or long commercial property leases of 99 years or more will be excluded, as will properties that are owner-occupied or those that are being sold, rather than let.

Although the Restrictions do not apply to sales, unless a non-compliant property is to be re-developed or owner-occupied, landlords should consider whether this may affect marketability and price negotiation. Lenders and buyers may require properties to be at least “E” rated.

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Exemptions may be available:

  • Where a landlord has been unable, within the preceding five years, to obtain necessary consents to carry out works to improve a property to EPC band E;
  • Where compliance with MEES would reduce the market value of the property by more than 5%; and
  • An exemption for up to 6 months in specified circumstances, including the renewal of a protected tenancy.

Exemptions must be recorded on a PRS exemptions register maintained by the Secretary of State and must be re-applied for as necessary.

What should landlords do?

  • Ensure EPCs are current and consider carrying out energy efficiency improvements identified in Recommendation Reports and look to involve a building surveyor if necessary;
  • Review existing leases to determine whether the costs of improvements can be passed to tenants;
  • Include certain protections within new leases, where possible; and
  • Consider whether exemptions may apply and if so, register them.

If you would like to discuss any of the points raised in this article, please contact Chris Anderson, Associate Solicitor in the commercial property team at Hay & Kilner

Call: 0191 232 8345

Email: Chris.Anderson@hay-kilner.co.uk