The Minimum Energy Efficiency Standard – What does it mean for me as a landlord?

March 23, 2021

The Minimum Energy Efficiency Standard (MEES) regulations were introduced in March 2015 and have their root in a range of energy efficiency policies which included the Green Deal. The current range of Energy Performance Certificate efficiency ratings span from A to G where A is the best and G the worst. In 2015 the government estimated that 18% of commercial buildings sat in bands F or G. The intention was that Building Regulations would address energy efficiency in new buildings and the MEES regulations would address improvements in older existing buildings.

The following buildings are exempt from the regulations:

• Industrial sites, workshops, agricultural buildings (non-residential), certain listed buildings, temporary buildings and holiday lettings
• Buildings where the EPC is over 10 years old or where there is no EPC
• Tenancies of less than 6 months or those greater than 99 years.

The requirements to meet the minimum standard of ‘E’ apply to the granting of new or renewal leases from 1 April 2018; properties not meeting this standard will require improvement works unless the landlord can show that, despite such works being carried out, the property remains sub-standard; or no improvement works can be made to the property; or a valid exemption applies. These exemptions are logged on a central government PRS exemptions register and are time limited so usually expire after 5 years. They cover situations where the landlord requires consent from the tenant to carry out the works and this is refused; or where the landlord receives an independent surveyor’s report stating that the improvement work will decrease the property price by greater than 5%; or where the landlord has purchased a property subject to an existing lease and he is permitted 6 month’s grace to allow him to complete the improvement works or apply for an exemption.

The landlord can achieve some relief if the expected value of savings over 7 years on energy bills as a result of the improvement work is the same or greater than the cost of the improvements. If this is the case, the landlord must register it on the PRS Exemptions register and supply 3 quotes to support this.

Failure to comply will attract a compliance notice which will specify the remedial actions required by a certain date. If these are not met, then a prohibition notice will be issued which may contain a fine. The fine will be based on a value equivalent to 10% of the property’s rateable value subject to a minimum penalty of £5,000 and a maximum of £50,000. After a further 3 months of breach these fines rise to between £10,000 and £150,000. A longer-term consequence is that the value of the property may fall as prospective purchasers would need to pay for remedial works to make it fit to let, or tenants may only be prepared to pay a lower rent to reflect this lower energy efficiency. In any event the potential losses to the landlord may be sizeable.

As if that was not a sufficient driver for action, the burning issue for landlords now is that from 1 April 2023 they may not continue to let any buildings which have an EPC of less than ‘E’. Therefore, landlords should review their properties which fall into this category as when the lease was originally granted there may have been no requirement to consider its energy value. There will undoubtedly be a rush on EPC assessors as this deadline approaches and landlords will also have to factor in the time required to modify the properties or seek appropriate exemptions. We have extensive experience advising landlords in respect of this issue and would welcome early engagement if required.

Wallace Robinson & Morgan Limited are based in Solihull & Dorridge and serve clients across Birmingham and the West Midlands, Warwickshire, Worcestershire and further afield. Our team of Company and Commercial Lawyers are happy to help if you would like advice about EPCs and other compliance-related issues.

If you would like to discuss your matter, please call 0121 705 7571 and ask to speak to a member of the Company and Commercial law team or email us at commercial@wallacerobinson.co.uk

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.