The Minimum Energy Efficiency Standards (MEES) are effective as of 1st April this year and affect both residential and commercial property.
Landlords will not be permitted to enter into a new lease or even a lease renewal from 1st April if the property has an energy performance rating of less than ‘E’ on the Energy Performance Certificate (EPC). This even applies to residential properties let on an Assured Shorthold Tenancy.
Properties with ‘F’ or ‘G’ ratings will be required to undertake works to improve energy efficiency before a lease can be entered into.
However, there are some exceptions to the regulations, such as:-
- Properties which are exempt from EPC requirements such as listed buildings or some industrial units;
- Commercial properties let for less than 6 months or for more than 99 years.
- Properties which are not privately rented.
Alternatively, you may be able to register on the PRS Exemption Register in the following circumstances:-
- Your tenants or lender will not agree to the improvements being made to the property despite your reasonable efforts to obtain the consent.
- You can show that the works will not pay for themselves over a period of 7 years based on the energy savings on the energy bills.
- The work would reduce the capital or rental value of the property by more than 5%.
Registration lasts 5 years whereupon you will have to reapply.
If you are not exempt from the regulations or have not registered on the PRS Exemption Register, failure to adhere to the regulations will be a criminal offence and you could incur a fine of up to £150,000 not to mention the adverse impact on your reputation as a landlord.
The new legislation has a staged introduction. In April 2020, the legislation extends to include all residential leases both new and existing and even further in April 2023 when commercial properties let on existing leases will also be included giving the regulations a retrospective effect.
If you are planning to let your property in the near future, check your EPC now to ensure that it meets the minimum standard required and consider what improvement works need to be made before you can let the property.
Landlord’s with existing tenants where leases will be in place in the next few years when the next stage of the legislation bites, would be prudent to start considering whether a gradual programme of improvement works can be undertaken to avoid any major impact on budgets and disruption to tenants.
Remember when entering into new leases to ask your lawyer to ensure adequate provisions are in place to allow you to access the property in order to produce an EPC and take any steps necessary to comply with the legislation and perhaps even require the tenant to undertake the works or contribute toward the cost of the same.