Minimum Energy Efficiency Standards (MEES) are being brought in by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. These Regulations will require landlords to ensure their properties reach certain standards (the MEES) in energy efficiency. With the first deadline of 1 April 2018 fast approaching, we recap on the requirements for landlords, and what happens if you don’t comply.
While the Regulations bring in changes for both residential and commercial landlords, the changes are slightly different. This article concentrates on the changes for commercial properties. We have written separately about residential properties.
Who do the Regulations apply to?
In short, most commercial properties. However, landlords of certain properties will not have to meet the MEES. These include:
- Buildings that are not required to have an EPC
- Tenancies of less than six months (with no right to renew) or over 99 years.
What must commercial landlords do to comply?
Landlords must ensure that their rental properties have an EPC rating of E or higher.
What changes must be made?
Landlords must make appropriate, permissible and cost-effective improvements. Landlords will be eligible for an exemption from reaching the MEES where they can provide evidence that they qualify. The main exemptions are:
- Where the landlord has completed all cost-effective improvements, but the rating remains F or G;
- Where the landlord requires consent to carry out works to the property, but the occupying tenant or freeholder withholds that consent; and
- Where an expert surveyor confirms that making the improvements would cause the property value to decrease by over 5%. Any measures that are expected to cause such a devaluation would be exempt.
Landlords must register all exemptions in a national register. If they fail to register the exemption, it will be ineffective. This amounts to non-compliance with the regulations.
Exemptions last for five years and are not transferable to a new landlord.
If landlords are looking to grant a new tenancy to a new tenant, or a new tenancy to an existing tenant (including extensions or renewals), they will need ensure their properties are up to scratch by 1 April 2018.
All commercial lettings must have an EPC of E or higher by April 2023.
Landlords will need to take action now in order to avoid huge repair bills in several years to come.
What happens if I don’t comply?
The penalties for non-compliance vary depending on how long the landlord has been letting out the property in breach of the MEES Regulations. The penalties also increase with the rateable value of the property:
- Failure of up to three months: 10% of the property’s rateable value. (Minimum penalty of £5,000 and maximum of £20,000).
- Failure of three months or over: 20% of the property’s rateable value. (Minimum penalty of £10,000 and maximum of £150,000).
What should commercial landlords do now and how can we help?
We would advise all landlords to consider their properties carefully. Not only will you face penalties for failing to comply, but you also risk loss of rental income if your property does not meet the requirements.
Even if you aren’t looking at letting out or renewing a tenancy in the next few months, it may be worth reviewing your property portfolio now in any case. Look at:
- The EPC rating for each property
- When are your properties due for renewal?
- Do any of them require works to be carried out?
- Do any exemptions apply?