Today marks the one-year count down to the next phase of changes in the application of minimum energy efficiency standards (MEES) in England and Wales.
From 1 April 2023, there will be a prohibition on landlords of commercial property continuing to let properties with an energy performance certificate (EPC) rating of either ‘F’ or ‘G’, unless certain exemptions apply. For domestic, privately let properties, this restriction has been in place since 1 April 2020.
Importantly, where a property is let (or continues to be let) in breach of MEES, the lease remains valid and in force but the landlord will be in breach of the regulations and exposed to penalties.
What should you be doing to prepare?
- Audit your portfolio:
- Does each property have an EPC rating of at least an E? If not, are any exemptions available?
- Does the existing lease allow the landlord to undertake improvement works? Can the costs of works be recovered?
- What are your intentions for each property? How can you future proof the property?
- Take caution on wholesale EPC renewals:
- Where you hold a valid EPC or you are not otherwise required to obtain an EPC for a property, a new EPC may see a property’s rating downgraded which may engage MEES obligations where the property could otherwise have been lawfully let for the foreseeable future.
What are the penalties for non-compliance?
- An enforcement authority can impose both financial and publication penalties.
- Penalties can be levied in respect of each unlawful tenancy. In a multi-let building, financial penalties could quickly add up.
Which exemptions are available?
The key exemptions available to commercial landlords are:
- Lack of consent – the landlord has been unable to obtain any necessary third-party consent to undertake necessary energy improvement works (e.g. planning, tenant consent to works)
- 7-year payback test – the necessary energy improvement work(s) will not ‘pay for itself’ by way of energy bill savings over a 7-year period
- Devaluation – improvements will reduce the market value of the property by more than 5% (to be supported by expert valuation evidence)
- New landlord – on purchasing a non-compliant property which is let to tenants, the new landlord has a 6 month ‘grace period’ from the date of purchase to bring the property up to at least an E EPC rating.
- All improvements made – all relevant energy improvement works have been carried out (or there are none that can be carried out) and the EPC remains below an E
- Short leases – leases not exceeding 6 months (where there is no previous continuous period of occupation exceeding 12 months and no right to renew)
- Long leases – leases of 99 years or more
To benefit from most exemptions, landlords must register them on the PRS Exemptions Register before seeking to rely on them.
Future of MEES
MEES obligations are anticipated to step again in the coming decade with government proposals for requirements of a minimum EPC rating of C in 2027 and B in 2030.
Landlords may therefore wish to implement any energy improvement work(s) with this in mind.
Further reading
Our Law-Nows:
- on Government’s proposed changes to energy efficiency in commercial buildings – available here.
- explaining the concept of MEES – available here.
- on residential MEES regulations – available here.
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