When the Energy Act 2011 was passed, it brought the first introduction of the concept of Minimum Energy Efficiency Standards (MEES). Then in 2017, the government published new guidelines that are to come into force in April 2018. These guidelines now make it a legal requirement for rental properties to be in line with these new energy standards – those that aren’t, will not be eligible to be let.
It’s vital that all landlords know that MEES will initially apply to all new commercial leases and lease renewals when it comes into force in April next year. It will then apply to all existing leases on private residential property in April 2020 and then to existing commercial leases in April 2023.
Using the Energy Performance Certificates (EPCs) as the standard for MEES, those properties that are rated as an F or a G would be considered as sub-standard and therefore not eligible to be let. The Local Authority will be responsible for imposing this penalty and fines.
It is estimated that as many as 18% of commercial properties and up to 10% of residential properties currently meet the EPC rating of F or G. These properties will be classed as non-compliant. In the first 3 months of non-compliance, fines of 10% of the rateable value of commercial properties with a minimum of £5000 and a maximum of £50,000 and £2000 for domestic properties.
If the breach of regulations continues for more than 3 months, there will be fines calculated from the rateable value of the commercial properties with £10,000 being the minimum fine and £150,000 maximum and £4000 for domestic properties.
There will also be an exemption register used where all landlords who breach the MEES regulations will have the breach published for 12 months minimum.
Check the accuracy of your EPC rating
With up to 70% of ratings estimated to be incorrect, it’s of primary importance that you check the accuracy of your property’s rating. This discrepancy in rating accuracy is down to the quality of assessments and how they are undertaken. EPCs are currently valid for ten years. If you have had any changes made to your property, then this could reflect either positively or negatively on your rating.
What happens when properties don’t make the grade?
The property will not legally be able to be let with a sub-standard rating, and it could also make it difficult to sell it without an upgrade. The value of the property would also be impacted by a low EPC rating.
Are exemptions available?
There is the possibility for exemption in some cases such as listed and/or historic buildings and those in conservation areas. However, granting these exemptions are not automatic and the criteria for doing so are strict. Other exemptions include:
- If the market value of a property would be reduced by more than 5% after making the energy efficiency improvements
- If the improvements will not pay for themselves after 7 years of energy saving, and are therefore considered to be financially unviable.
- Churches or other buildings used as a place of worship.
- Detached buildings with floor space that is under 50 sqm.
- Temporary buildings that will be used for 2 years or less.
All exemptions will need to be added to the PRS Exemption Register held by central government before 1 April 2018 and last for 5 years but cannot be transferred to a new landlord.
With deadlines looming, it’s time for landlords to ensure the accuracy of their EPC rating and to take steps to improve it if necessary.