How well do you know MEES Regulations?
From 1 April 2018, the Minimum Energy Efficiency Standards (the “MEES”) will make it unlawful for landlords to let a property which fails to meet the minimum required E energy rating as shown on a property’s Energy Performance Certificate (EPC).
The regulations apply to the granting of both new leases and lease renewals and, from 1 April 2023, the regulations will broaden to make all active leases unlawful for ‘sub-standard’ properties.
Does MEES apply to your property?
MEES does not apply to:
- buildings which are not required to have an EPC: such as industrial sites, workshops, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties and holidays lets;
- buildings where the EPC is over 10 years old or where there is no EPC;
- tenancies of less than 6 months (with no right of renewal); and
- tenancies of over 99 years.
How many properties will be affected?
Collectively around 65 per cent of properties in England and Wales are at risk of non-compliance. This is because 18 per cent are F and G-registered and the 47 per cent that are D and E-rated should not be considered “safe” as they are at risk of being downgraded to F or G ratings. With EPCs first being issued in 2008 and having a ten year validity, many will require reassessment this year under tougher Building Regulations standards, which could lead to significant downgrading of the rating, even where previously the EPC rating was an E or above.
What are the consequences of breaching the MEES?
Financial penalties will be enforceable from 1 April 2018 in an aim to ensure all properties are MEES compliant. The financial penalties for landlords allowing an F or G rated property to be let will be based upon the values set out below (the penalty calculation being linked to the property’s rateable value):
- a minimum penalty of £5,000 per property (which includes small properties); and
- up to £150,000 for a three month period of non-compliance.
All infringements of the MEES will be made public on a ‘name and shame’ list, so tenants will be able to identify if their landlord has complied.
In addition to the above sanctions, it is not yet known what impact a non-compliant property may have on rental values for a property, lease rent reviews and interim and terminal dilapidations valuations.
What can Landlords do to ensure they are compliant?
The MEES Regulations could significantly alter the landlord and tenant relationship and a savvy tenant could put their landlord in a very uncompromising position should the property in question currently be non-compliant. Accordingly, landlords need to be aware of the MEES in order to protect their position.
The risk potential of a given property can only be judged individually by taking into account the following:
- the validity of the existing EPC;
- the risk profile of the property failing the MEES Regulations;
- the ability to recoup upgrade costs from the tenant; and
- the applicable exemptions, if any apply (these include leases of less than six months or more than 99 years, and properties where an EPC is not required).
What we can do to help…
We can help with the drafting of new or renewal leases to ensure that landlords have the rights they require to undertake any MEES Regulation compliancy works. The ability of landlords (and tenants for that matter) to protect themselves through careful drafting will be important to regulate the impact of the MEES Regulations on the relationship and avoid any contentious situation moving forward. We can also put you in touch with qualified energy assessors in order for you to get an updated EPC and discuss any compliance requirements.
For further information on MEES and how we can help, please contact Nick Ripper, or you can give us a call on 0345 070 6000.