Minimum Energy Efficient Standards – Key date for residential properties
The Minimum Energy Efficiency Standard Regulations (MEES Regulations) have been in place since April 2018 with a view to encourage Landlords to improve the energy performance of their properties.
Since April 2018 it has been unlawful to grant a new lease of a substandard property – one with an EPC rating of below an E.
From 1 April 2020 it will become unlawful to continue to let a substandard residential property, unless an exemption applies, and that exemption is appropriately registered. This is a significant change and could impact huge swatches of residential lettings across the country. Similar provisions will be enforced in relation to Commercial Properties in 2023. Although three years away, it is an important consideration for commercial Landlord’s currently granting leases with terms over three years.
The Regulations will apply to domestic private rented property and includes properties let on ASTs (Assured Shorthold Tenancies). Residential leases granted for a premium and a long term (i.e. 125 years) may also be caught by the Regulations if they satisfy the following conditions:
• a ground rent in excess of £250 p.a. (or £1,000 in Greater London); • the tenant is an individual(s); • and the property is used as the tenant’s principal residence.
If a property, which is subject to an existing tenancy, does not have a valid EPC there ought not to be any breach of the above requirements until such time as the requirement for an EPC is triggered.
A landlord is not required to spend more than £3500 on any improvement works provided you have applied for the necessary exemption. Landlords can also apply for an exemption where:
• No improvements can be made because the cheapest measure would exceed £3500; • the only relevant improvements are wall insulations, and these would negatively impact on the building structure • the improvements require a 3rd party consent which cannot be obtained despite reasonable efforts to obtain it • the improvements would decrease the market value of the Property by more than 5% • a landlord is required to grant a new lease pursuant to an agreement for lease or court order (only new landlords for the first 6 months of ownership).
However, the Landlord must apply for the appropriate exemption which will then be noted on a PRS Exemption Register for 5 years. After this, the Landlord must try to improve the EPC rating or apply for a further exemption. Any registered exemptions will not pass on the sale of a Property, and the new owner must either improve the energy performance or apply for their own exemption.
Breaching the Regulations by continuing to let a substandard property can attract a fine of up to £5,000 per property, per breach. It is therefore vital that Landlords take appropriate steps to ensure that all residential properties within their portfolio have an EPC rating of at least grade E. Any which are substandard and which will continue to be let after 1 April, or where a new tenancy is intended, should either be improved or have the relevant exemption registered before 1 April. Consideration should also be given at this stage to any commercial properties which will be let within the next few years, in readiness for the regulations affecting commercial properties in 2023.