From April 1st 2018 MEES came into force and restricts landlords from granting or extending tenancies of both commercial and residential property where the Energy Performance Certificate (EPC) is below an E rating. The new rules will require landlords to improve energy efficiency to their properties before renting them out.
The EPC has been in place for a number of years and introduced minimum energy efficiency standards for domestic and non-domestic rented properties in England and Wales. Data collected by the Government displayed that at least 12% of properties have EPC rating of below E and this allowed leverage to encourage improvements in energy efficiency of buildings. If ratings are to be raised in the future, Grade E properties may also become unlawful to rent in addition to grades F and G; or as an alternative, the grade thresholds themselves may be raised.
- From April 1st 2018 it will be unlawful for a landlord to grant a new lease with an EPC rating of F or G. This will also prevent subleases and lease renewals.
- From April 1st 2020 it will be unlawful for a landlord to continue to let a residential property with an F or G rating, the regulation will apply to ALL existing residential leases which are required to have an EPC.
- From April 1st 2023 it will be unlawful for a landlord to continue to let a commercial property with an F or G rating, the regulation will apply to ALL existing commercial leases which are required to have an EPC.
MEES will not apply to all commercial properties. The following properties are excluded from MEES entirely:
- Properties that do not require an EPC e.g. certain listed buildings, temporary buildings and buildings due to be demolished.
- A property which does not have a valid EPC. For a property to be valid, the EPC must be no older than 10 years old.
- A property let for a term of 6 months or less or 99 years or more.
- A property occupied under a licence to occupy.
Exemptions can also be granted for a maximum of 5 years for the following circumstances:
- The property is still an F or G rating despite the landlord carrying out the recommended works.
- The recommended energy improvements do not pay for themselves in energy savings over a seven year period.
- The landlord has been unable to attain third party consent needed for the works despite reasonable efforts to do so, or the consent has been given subject to a condition which the landlord cannot reasonably comply (e.g. consent of a tenant, a superior landlord or the local planning authority).
- The landlord has obtained a report by an independent surveyor stating that energy improvements would have a negative impact on the structure of the property or would reduce the property’s value by greater than 5%.
Temporary exemptions can be granted for a maximum of 6 months in order to give the landlord some time where they have recently taken on a lease for the following examples:
- The landlord has bought a property which is subject to an existing lease.
- The lease has been renewed pursuant to the Landlord and Tenant Act 1954.
- The lease has been granted pursuant to a contractual obligation.
Both exemptions must be registered on the central register and once expired, the landlord must carry out the necessary energy improvements or register for a full exemption if a temporary exemption was originally granted.
Penalties for breaching MEES involve a civil penalty of up to 20% of the rateable value of the property capped at £150, 000 of which no penalties will be payable by the tenant.