New energy efficiency legislation for landlords

From April 2018, private landlords of commercial and residential properties will have to ensure that their properties meet new Minimum Energy Efficiency Standards (MEES).

What are the new Minimum Energy Efficiency Standards?

The Minimum Energy Efficiency Standards (MEES) have been introduced to help the UK meet its carbon reduction targets for 2020.

This new law requires all commercially-let properties to have an Energy Performance Certificate (EPC) rating of ‘E’ or higher. Currently, properties are ranked from A-G, with A being the most efficient and G being the least efficient. From April 2018 onwards, landlords who own a property with a rating of F or G will be no longer allowed to renew or issue a new tenancy for more than 6 months. Any breeches will occur a substantial fine.

It is estimated that 18% of commercial properties have an EPC rating of F or G and will be affected by this law.

What should I do?

To avoid the loss of income by not being able to let out your property or becoming subject of penalties between £5,000 – £150,000, you should audit your property portfolio to identify any properties affected.

Check your EPC ratings. Your EPC certificate will have an accompanying Recommendations Report. This Recommendation Report identifies what measures are deemed to be necessary – Remember, you only need to implement those measures with a payback period of 7 years or less.

Are there exemptions from MEES regulations?

Exemptions to MEES do exist. If a property is proven to be exempt, a landlord must provide details and evidence of the exemption to a centralised self-certification register – the PRS Exemptions Register, allowing them to let, or continue to let, a sub-standard property.

Exemptions include:

  • EPC exemptions – Building which do not require an EPC certificate are also exempt from MEES.
  • Seven-year payback – Upgrades do not have to be undertaken when the payback period can be shown to exceed 7 years.
  • Third party exemption – If third-party consent is required, such as planning permission, and has not been granted despite all reasonable efforts being made.
  • Property devaluation exemption – If a chartered surveyor considers the upgrade to devalue the property by more than 5%.
  • Exemption due to recently becoming a landlord – Temporary 6 month exemption for people suddenly and unexpectedly becoming landlords.
  • Where all reasonable upgrades have been implemented and the building still fails to meet the threshold.

What are the penalties?

If a landlord continues renting out a property in breach of the MEES regulations for a period of fewer than three months they face a fine equivalent to 10% of the property’s rateable value, min £5,000 and a maximum of £50,000. After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.