Landlords Beware - The Changes to Minimum Energy Efficiency Standards (MEES) are here!

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Commercial Property Article

09 April, 2018

Stacey Lakeland

As of 1 April 2018, the Energy Efficiency (Private Rented Property (England and Wales) Regulations 2015 have brought into force Minimum Energy Efficiency Standards (MEES) in the commercial and private rented sector.

Landlords of buildings within the scope of the MEES regulations must not renew existing tenancies or grant new tenancies if the building has less than the minimum Energy Performance Certificate (EPC) rating of "E" unless they fall into one of the exempted categories. Landlords with properties with an EPC rating of less than "E" will have to carry out works to improve the energy performance of the building.

From 1 April 2023, MEES will be extended to cover all leases, including existing leases but only if the property is legally required to have an EPC on the relevant date. An EPC commissioned voluntarily (i.e. at any time other than when the property was to be sold or let) will not, in itself, require the landlord to comply with MEES.

The MEES Regulations do not apply to the following:

  1. 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 holiday lets;
  2. Buildings where the EPC is over 10 years old or where there is no EPC;
  3. Tenancies of less than 6 months (with no right of renewal); or
  4. Tenancies of over 99 years.

There are several exemptions from compliance and therefore allow a property to be legally let with an EPC rating below "E":

  • The 'Golden Rule': where an independent assessor determines that all relevant energy efficiency improvements have been made to the property or that improvements that could be made but have not been made would not pay for themselves through energy savings within seven years. There are numerous examples of "relevant" energy efficiency improvements which include double-glazing and pipework insulation which need to be considered; wall-insulation measures are not required where an expert determines that these would damage the fabric of the property.
  • Devaluation: where an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%.
  • Third Party Consent: where consent from persons such as a tenant, a superior landlord or planning authorities has been refused or has been given with conditions with which the landlord cannot reasonably comply.

In all instances, the exemptions are only valid for five years and cannot be transferred to a new landlord. Also, all exemptions must be registered on the central government PRS Exemptions Register.

An estimated 10% of residential properties and 18% of commercial properties currently have an EPC rating of F or G and will be classed as non-compliant. Where the breach is for less than three months the fine will be equivalent to 10% of the rateable value of commercial properties, subject to a minimum penalty of £5,000 and a maximum of £50,000 and £2,000 for residential properties. Where the breach occurs for more than three months, the fine will be equivalent to 20% of the rateable value for commercial properties subject to a minimum penalty of £10,000 and a maximum of £150,000 and £4,000 for residential properties.

Furthermore, if the landlord breaches the MEES regulations, the breach will be published on the exemptions register for a minimum of 12 months.

The new regulations have very significant implications for landlords, and for occupiers who wish to assign or sublet space, as the marketability of some properties will become impossible unless they are upgraded to meet the minimum standards. Landlords need to take action now to avoid penalties and protect the value of their assets.

Forbes Solicitors has a team of experienced commercial property specialists who can assist with all aspects of buying, selling and leasing commercial property.  For more information please contact the Commercial Property team on 0800 689 0831 or send any questions to us via our online Contract Form.

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