Guidance for Landlords on the Minimum Energy Efficiency Standards

On the 26th March 2015, the Energy Efficiency (Private Rented Sector) (England and Wales) Regulations passed into law. The minimum energy efficiency standards also known as MEES are due to impact both domestic and commercial landlords. From 1st April 2018 it will be unlawful for you to let a property with an Energy Performance Certificate below a Band ‘E’ rating. We have therefore prepared a short overview setting out your responsibilities and the implications of non-compliance.

Domestic Landlords

For domestic properties, there are two distinct elements:

1. From 1st April 2016, Tenants have a right to request consent for energy efficiency improvements. The Tenant must:

1. Be able to evidence that energy efficiency improvements will be generated by the proposed works;
2. Have proof of funding.

If these two criteria are met, you won’t be able to unreasonably withhold your consent to the works being carried out. You may however propose alternative improvements.

2. From 1st April 2018 you will have to ensure that the property has a minimum energy standard of E or above before granting a new lease or a lease renewal.

Commercial Landlords

For non-domestic properties:-

1. From 1st April 2018, you must ensure that the property has an EPC rating of Band ‘E’ or above before granting a new lease or lease renewal.

2. From 1st April 2023, you will have to ensure all properties meet Band ‘E’ or above even when a lease is already in place and a property is occupied by a tenant.

Exclusions and Exemptions

The upcoming legislation applies to all leases granted for a term of more than six months and less than 99 years unless you are eligible for an exemption.

You will only be eligible for an exemption if one of the following applies:-

1. The works needed to improve your EPC rating to a Band ‘E’ are not cost-effective. This means that the works would not pay for themselves through energy cost savings within 7 years of being completed;

2. You are unable to obtain the consent of a third-party such as the planning authority, lender or tenant to carry out the improvements;

3. The improvements would result in a drop in value for your property of more than 5%.

It is worth noting that the above exceptions will only apply for a maximum of 5 years and you must file evidence to support your exemption which will be accessible on a public register.

Action to take now

It is estimated that 18% of rental properties are currently non-compliant. The penalties for non-compliance range from a minimum fine of £5,000 to a maximum of £150,000.

You are well advised to consider your Energy Performance position now and prepare in advance for the upcoming deadlines. Improving your Energy Performance rating presents an opportunity to add value to your property. We would also advise liaising with your solicitor to draft new leases to manage the risk and the impact that MEES may have on you or your business.

We would be happy to explain the ramifications of the upcoming legislative changes in more detail with you and discuss the best approach for your property. For more information contact Katy Washington or Kirsty Kelshaw