The Minimum Energy Efficiency Standard
The Minimum Energy Efficiency Standard (MEES) for commercial & residential properties comes into force on 1st April 2018. It is estimated that buildings account for 43% of the UK’s total carbon-dioxide emissions.
Government estimates that 18 per cent of commercial properties hold the lowest EPC ratings of F or G. While Building Regulations ensure that new properties meet the current energy efficiency standard, MEES will tackle the UK’s older buildings.
From 1st April 2018 Landlords will not be permitted to grant a lease of a property with an EPC rating below E unless they’ve carried out all possible cost-effective energy efficiency improvement works, or an exemption applies.
From 1 April 2020: (in the case of residential properties) or 1st April 2023 (in the case of commercial properties), landlords will not be permitted to continue to let properties with an EPC rating below E on an existing lease unless an exemption applies.
What are the exemptions?
Landlords do not have to carry out any improvement works where –
- Third Party Consents (eg from the tenant, planning authorities, mortgagee’s consent etc) are not available. To be released of its obligations the Landlord needs to show that despite reasonable efforts by the landlord to obtain any necessary third party consent, that consent has been refused or granted subject to a condition with which the landlord cannot reasonably comply.
- The works are not cost effective. The Landlord will need to be able to demonstrate that within seven years, the expected energy bill savings will not equal or exceed the cost of purchasing, installing the improvement measures.
- A report from an independent surveyor states that the works will reduce the value of the property by 5% or more, or that written confirmation by an expert states that wall insulation required to improve the property may damage the fabric or structure of the property, or the building of which it forms part.
In order to apply for an exemption the landlord will need to provide such evidence to a centralised register, the “PRS Exemptions Register.” The exemptions have a limitation period of 5 years. Therefore, the landlord will have to regularly review whether energy efficiency measures can be implemented to bring the EPC rating up to band E or above, or whether the grounds for the exemption still apply.
Enforcement & Penalties
The enforcement authorities for the MEES Regulations are the:
- Local authority for a domestic PR property.
- Local weights and measures authority for a non-domestic PR property.
The authorities will have the power to enforce civil penalties for non-compliance with the MEES Regulations. The penalty will reflect the property’s rateable value, and will range from a minimum penalty of £5,000 to a maximum of £150,000.
- Marketability of properties with low EPC ratings will be more difficult unless the upgrading is reasonable and easy to implement. This could have a knock on effect on the valuation of the properties.
- Lenders will also be affected by the new regulations as they will need to take measures to ensure that the value of their security is not involuntarily affected.
- New Leases will need to be carefully drafted in order to ensure adequate provisions are in place for compliance with the MEES Regulations.
No doubt there may be further implications to consider upon the implementation of the MEES Regulations in 2018, and it is important that your solicitor advises you, whether you are a Landlord or a Tenant, of how the forthcoming regulations will impact you in the future.