Landlords urged to prepare for Minimum Energy Efficiency Standard Regulations

3rd March, 2017 by Joanna Nicholls

The clock is ticking for landlords to prepare for the new Minimum Energy Efficiency Standards (MEES) which come into force on 1 April 2018. From this date, it will be unlawful to grant a new lease for properties which have an energy performance certificate (EPC) rating below E, unless an exemption is registered.

Landlords failing to comply with the new regulations face hefty penalties - so it’s important to act now and plan ahead. Landlords should review their property portfolio and consider options for improving the energy efficiency of low-rated buildings to raise their EPC rating above the minimum threshold.

The regulations

MEES Regulations are designed to help the government achieve its targets of reduced carbon emissions by ensuring that commercial and domestic landlords achieve a certain level of energy efficiency before they can let their buildings.

Since April 2016, tenants of domestic properties have been able to request their landlord’s consent to energy efficient improvements. Consent must not be unreasonably withheld, notwithstanding what the tenancy agreement says (subject to exemptions).

From 1 April 2018 landlords will not be able to grant a new lease (including renewals or extensions) of domestic or non-domestic property that is rated at F or below on the building’s EPC.

From 1 April 2020 landlords of domestic property will be prohibited from continuing to let an already tenanted building rated at F or below, the cut-off date for landlords of commercial buildings is 1 April 2023.

Exemptions to the post-2018 obligations

From 1 April 2017 landlords of non-domestic properties can register exemptions. Landlords of domestic properties can register exemptions from 1 October 2017. To be valid, exemptions have to be on the public register and landlords can only rely on exemptions for a period of five years.

Exemptions include:

Buildings that are exempt from EPC requirements, for example, places of worship and some listed buildings;
Where required consents are not forthcoming;
Where professional evidence establishes that works would reduce the value by more than 5%;
Temporary exemptions – for example, where the tenant is insolvent;
Any domestic lettings that are not assured or regulated.

Penalties for non-compliance

Landlords will face hefty penalties for non-compliance:

If the breach is less than 3 months – the greater of £5,000 or 10% of rateable value of the property, up to maximum of £50,000;
For breaches of more than 3 months – the greater of £10,000 or 20% of rateable value of the property, up to maximum of £150,000;
Publication of the penalty on public register;
Risk not being able to let the property;
Investors may not invest if the income stream and/or the value of the security is jeopardised;
Tenants can take steps if their landlord is not compliant.

Act now

While the new regulations do not come into force until April 2018, there are a number of practical steps landlords can take now, to prepare for the changes and help mitigate the impact of the changes:

Review your property portfolio’s EPCs;
Review leases to determine expiry/renewal dates;
Review leases to determine whether clauses allow for works to be undertaken, by whom and at whose cost;
Put in place a strategy for carrying out improvements where necessary.

Joanna Nicholls is a Partner with Howes Percival specialising in Commercial Property Law

The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.

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