The Minimum Energy Efficient Standards, or the MEES, were introduced in April 2015. The standards are designed to ensure that all rented residential and commercial property are suitably efficient with a minimal impact on the environment. The standards relate to aspects of the property such as heating, insulation and use of electricity. For example, premises with solar panels could benefit from decreased energy consumption and therefore have an improved energy rating.
The better the energy efficiency rating of a property, the less the impact on the environment, and potentially, the more residents can save on their utility bills.
We asked solicitors Dutton Gregory about the essential points around the Minimum Energy Efficient Standards (MEES).
What is the Minimum Energy Efficiency Standards (MEES)?
The definition of the Minimum Level of Energy Efficiency is the government set standards for the lowest rating of Energy Performance Certificate (EPC). The legislation paperwork states that:
“...the prescribed minimum Energy Performance Certificate (EPC) rating (band E) allowed under the Regulations for non-domestic private rented property which is let (including renewal) from 1 April 2018 or which continues to be let from 1 April 2023, subject to any qualifying exemptions.”
This means two things:
- from 1 April 2018, landlords of residential and commercial property may not grant a tenancy to new or existing tenants if their property has an Energy Performance Certificate/EPC rating of band F or G (shown on a valid Energy Performance Certificate for the property); and
- from 1 April 2023, landlords must not continue letting a non-domestic property which is already let if that property has an EPC rating of band F or G.
It’s also safe to assume that this also applies to lease renewals.
What else does it apply to?
ALL non-domestic properties in England and Wales which are let under any type of tenancy and which are legally required to have an Energy Performance Certificate.
It does not apply to properties let on licence, or ‘agreement for lease’ arrangements. However, it does apply to sublettings.
Although it’s worth noting that a non-domestic property is not required to meet the minimum standard if it is granted for a term of less than 6 months or 99 years or more.
The Regulations also do not apply to voluntary Energy Performance Certificates.
How does it relate to the Landlord & Tenant Act (LTA) 1954
There is nothing in the Regulations that interferes with the rights, validity or enforcement of a tenancy under any other regulations, including the LTA 1954.
In situations where a new lease is granted in accordance with the LTA 1954, and where the property to be let below an EPC rating E, the landlord may be eligible for a temporary, six month exemption from the requirement to improve the property to an E.
A landlord cannot refuse consent to a lease renewal on the basis that the property is sub-standard and tenants may not use a landlord’s failure to comply with MEES as a reason to prematurely terminate their lease.
Are there circumstances when an Energy Performance Certificate may not be required?
In short, yes. Some exemptions including:
- A building that is officially protected as part of a designated environment, or because of their special architectural or historic merit, where compliance with certain minimum energy efficiency requirements would unacceptably alter their character or appearance;
- A building used as places of worship and for religious activities;
- A temporary building with a planned time of use of two years or less;
- Industrial sites, workshops, non-residential agricultural buildings with low energy demand and non-residential agricultural buildings which are in use by a sector covered by a national sectoral agreement on energy performance;
- Stand-alone buildings with a total useful floor area of less than 50m² (i.e. buildings entirely detached from any other building);
- The building is furnished holiday accommodation as defined by HMRC and the holiday-maker is not responsible for meeting energy costs.
What happens when works have been done but the property remains sub-standard?
Where a landlord has made all the relevant energy efficiency improvements that can be made (or if there are none that can be made), and the property remains sub-standard, Regulation 29 provides for an exemption to the prohibition of letting sub-standard property.
Who is responsible for the work?
In truth, neither the Regulations nor the guidelines state explicitly that the landlord is responsible for the improvements works. However, the language certainly suggests so.
Also, given that it is the landlord that will impose a penalty for not complying, it would be in their best interests to make sure the property meets the requirements.
What is the seven year pay-back test?
The seven year payback test (Regulation 28(3)) is met where the expected value of savings on energy bills that the measure is expected to achieve over a period of seven years are equivalent to, or greater than, the cost of repaying it.
This involves a very specific formula and applies to a particular set of improvements but, in summary, installation of specific energy efficient improvements (namely, Table 6 of the Building Regulations Approved Document L2B) will only be required for a non-domestic property where the recommended measure achieves an energy efficiency payback of seven years or less.
What if the building is listed?
Many presume that if a building is listed, an exemption to the Regulations automatically applies. However, this is not the case.
As stated above, where any alterations to reach the minimum standards would alter the appearance or character of a building, there may be an exemption but this relies on a prior assessment being carried out on the listed building to reach that conclusion.
The Regulations also include a special provision for Wall Insulation (Regulation 28(2)). An energy efficiency measure is not considered to be a relevant measure where it is:
- cavity wall insulation, external wall insulation or internal wall insulation (for external walls), and
- where the landlord has obtained written expert advice which indicates that the measure is not appropriate for the property due to its potential negative impact on the fabric or structure of the property (of the building of which the property forms a part).
Are there any more exemptions?
Further to any exemptions mentioned above, there is also:
- Third Party Consent exemption (Regulation 31(1))
Certain energy efficiency improvements may legally require third party consent – i.e. local authorities, mortgage lenders, etc. A landlord may let a sub-standard property where they can demonstrate that they have been unable to obtain one or more necessary consents.
The landlord registers the exemption on the PRS Exemptions Register which is valid for five years from the date the exemption is registered, or, where lack of tenant consent was the issue, until the current tenancy ends. The Regulations require a landlord to make ‘reasonable efforts’ to obtain third party consent.
- Property Devaluation exemption (Regulation 32(1))
This is a temporary exemption of five years which applies where the landlord has obtained a report from an independents RICS surveyor advising that the installation of specific energy efficiency measures would reduce the market value of the property, or the building it forms part of, by more than 5%.
The property valuation must not include the cost of the measures themselves of the cost of installation.
- Recently becoming a landlord (Regulation 33(1) or (3))
There is a six month exemption applied after the date they become the landlord in the following circumstances:
- grant of a lease due to a contractual obligation;
- where the tenant becomes insolvent and the landlord has been the tenant’s guarantor;
- the landlord has been a guarantor, or a former tenant, who has exercised the right to obtain an overriding lease of a property under s.19 of the Landlord and Tenant (Covenants) Act 1995;
- a new lease has been deemed created by operation of law;
- a new lease has been granted under Part 2 of the LTA 1954;
- a new lease has been granted by a court order, other than under the LTA 1954.
Any exemption claimed by a landlord may not pass over to a new owner or landlord upon sale, or other transfer of the property. The exemption will cease to be effective and the new owner will either need to improve the property to the minimum standard or register an exemption where ones applies if they intend to continue to let the property.
There is a useful table in the guidance that sets out what additional information is required in relation to each specific exemption.
ALL exemptions will need to be registered on the PRS Exemptions Register.
How can all of this be enforced?
Every local weights and measures authority (LWMA) is the “enforcement authority” for their area and will be responsible for enforcing compliance.
Where the enforcement authority believes that a landlord may be in breach, or has been in breach in the last 12 months, they may serve a compliance notice that requested information from that landlord which will help them to decide whether that landlord has in fact been in breach. Failure to respond to that notice may result in a penalty notice being served (up to £5,000).
What are the penalties?
Where an enforcement authority is satisfied that a breach of the Regulations has occurred, they have the discretion to decide on the amount of the penalty, up to the maximum limits set by the Regulations.
The maximum penalties differ depending on whether they have been less than three months in breach, or three months or more in breach. Again, there is a useful table in the guidance which shows the penalties available.
A penalty notice may also be served where the landlord has uploaded false or misleading information to the Exemptions Register.
If a landlord does not pay a financial penalty imposed on them, the enforcement authority may take the landlord to court to recover the money. A landlord has 28 days to submit an appeal to the First-tier Tribunal from the date of the local authority’s decision.
Got any questions?
You can read the full guidance documents at www.gov.uk/government/publications/the-private-rented-property-minimum-standard-landlord-guidance-documents.
If you have any questions about what the Minimum Energy Efficiency Standard (MEES) means for you, your property or your business, you can contact Dutton Gregory by calling on 02380 221344 or emailing firstname.lastname@example.org
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