Legal briefing | 09 Mar 2017 |

Minimum Energy Efficiency Standards (MEES)

The Department for Business, Energy and Industrial Strategy (DBEIS) published guidance for landlords of non-domestic private rented property on the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the Regulations) on 23 February 2017 (the Guidance).

Draft guidance was published last year, which we discussed in our June 2016 briefing. This note focuses on a few key points in the long-awaited final form guidance from the DBEIS.

Triggers for the MEES regime

The minimum level of energy efficiency prescribed by the Regulations is EPC rating E. In principle, the Regulations only apply to properties that are required to have an EPC rating. The Regulations apply to new lettings from 1 April 2018 and to all lettings from 1 April 2023.

EPCs are valid for 10 years. If an EPC expires before 2023 there is no requirement to produce a new one (so no requirement to carry out improvements) unless a triggering event occurs, such as a further letting (including a renewal lease or lease of part) or sale of the property.

A voluntary EPC (produced where there was no obligation to do so) may be registered on the official EPC database but registration does not oblige the landlord to perform works on the building if a voluntary EPC shows a rating of F or G.

            
        Exclusions from the MEES regime
    
Licences and agreements for lease.

Tenancies which do not exceed 6 months (where the tenant has not been in occupation for over 12 months).

Tenancies granted for over 99 years.

Listed Buildings may not require an EPC if complying with the MEES regime would unacceptably alter their character or appearance.

Places of worship.

Temporary building sites.

Small stand-alone buildings with a total useful floor area of less than 50m2.

Industrial sites, workshops and non-residential agricultural buildings with low energy demand.

The PRS Exemptions Register

Certain properties will be exempt from the MEES regime (see box). The PRS Exemptions Register will be a centralised selfcertification register open to the public. Properties which are covered by the minimum standard provisions which qualify for a valid exemption will need to be registered. Although the PRS Exemptions Register will be open to non-domestic landlords from 1 April 2017, there is no requirement to register an exemption before the minimum standard requirements come into force on 1 April 2018.

            
        Exemptions include:
    
Third party consents
A landlord may let a substandard property if they have been unable to obtain consent (despite making reasonable efforts) from their tenant, superior landlord, local authority, mortgage lender or other third party. This exemption typically lasts for 5 years.Property devaluation
A landlord may let a substandard property if the works required to meet the required value would reduce the market value of the property by more than five percent. This exemption lasts for 5 years.Recent landlords
In limited circumstances, a person may let a sub-standard property if they have recently become a landlord. They will have 6 months to carry out the works.

Seven year payback test

A landlord will be required to do the works to bring a building that is subject to the Regulations in line with the minimum energy standard if the expected value of the energy savings over 7 years is greater than the cost of doing the works. This applies even if the landlord is unable to afford the works.

Landlord and Tenant Act 1954

The MEES regime does not affect the lease renewal provisions under the Landlord and Tenant Act 1954. Tenants cannot to use a failure to comply with the regime to terminate their leases. Landlords cannot refuse consent for a lease renewal using the MEES regime.

Where the works have been done but the property remains sub-standard

Where the landlord has made all of the changes but the property remains sub-standard, the landlord must register the property on the PRS Exemptions Register but the exemption ends on a transfer of the property. Any new owner or landlord will need to either improve the property or register a new exemption if one applies.

Enforcement

The Local Weights and Measures Authorities will enforce the minimum standards. The maximum fine for unlawfully letting a substandard property is £150,000 per unit. It is possible that a low EPC rating of a multi-let building could exceed this cap.

Next steps

We would be pleased to assist with any MEES enquiries you may have - please contact Simon Rutman or another member of the Travers Smith team to discuss.

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