Minimum Energy Efficiency Standard (MEES) – Changes from 1st April 2023
Reducing our impact on the environment has been of more and more concern to businesses, governments and communities all around the world in recent years, and the knock on effects of trying to reduce global carbon emissions has never been more apparent.
As part of the government’s wider efforts to curb carbon emissions, reforms to the Energy Performance Certificates (“EPC”) regime have been phased in over the last decade to help with this effort.
These are provided for by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, commonly known as the Minimum Energy Efficiency Standard (“MEES”) which many refer to it by.
The latest instalment of the reforms will shortly be upon us, with further restrictions applying to the letting of sub-standard non-domestic premises.
What are EPCs and what does the current law say?
EPCs report on the energy efficiency of a property, graded from A to G – with A being the most efficient and G being the least.Since 1 April 2018, landlords have been required to ensure that their properties achieve a minimum E rating before new tenancies could be granted.
What are the changes from 1 April 2023?
From 1 April 2023, it will be unlawful for landlords to continue the letting of sub-standard business premises with a rating falling below E, unless a permitted exemption can be claimed (such as places of worship, temporary buildings and those which required changes would have a negative impact on).
The new measures apply to existing tenancies which, in some cases, may have predated the original April 2018 changes. Any such tenancies would remain valid despite the sub-standard nature of the premises.
Some landlords could conceivably be in breach for a continuing tenancy of sub-standard premises with little power to address the position without tenant cooperation.
What are the penalties for breach?
Where a landlord is in breach and the unlawful letting continues for more than three months, fines of up to £150,000 could be imposed in the most serious cases.
In addition, the landlord’s breach could be published in the public section of the National PRS Exemptions Register – essentially, a ‘naming and shaming’ of the landlord.
Both of these penalties could have a serious impact on landlords and businesses and it’s crucial that you ensure compliance and follow these regulations to the letter of the law.
What are the permitted exemptions?
Where sub-standard premises remains tenanted on or after 1 April 2023, exemptions from breach may be available to the landlord in the following instances:
- Where all relevant energy efficiency improvements have been made (or there are none that can be made), and the EPC rating remains below E.
- Where some third party consent is required for the work to upgrade the rating of the premises and the landlord has, despite its efforts, been unable to obtain the necessary consent.
- Where the landlord obtains an independent surveyor’s report confirming that the relevant energy efficiency improvements would result in a reduction of 5% or more in the market value of the property.
- When a new landlord acquires a property which is already let.
Where applicable, the first three exemptions above last for 5 years. The last exemption applies for no more than 6 months. Any exemptions claimed must be registered in the National PRS Exemptions Register.
What action should landlords be taking?
Landlords should review their non-domestic letting portfolios to ensure that EPC ratings are compliant with the new MEES standards. If not, landlords should either carry out the relevant energy efficiency improvement work or seek immediate advice as to what exemptions may be available to them.
Depending on the letting terms, there may be scope for a tenant contribution to the cost of works, although this is subject to a case by case review and will depend on the specific terms of the tenancy as well as a range of other factors.
Moving forward, the EPC rating of premises is set to become a more prominent commercial consideration for new and existing tenants and also investors, banks and other lenders taking security.
How Ellis Jones can help
Ellis Jones has a specialist Commercial Property Team who will be able to advise on anything you need to know regarding Minimum Energy Efficiency Standards. We can offer our services in both the South and London. To discuss your commercial property needs please contact a member of our expert team on 01202 525333 or email firstname.lastname@example.org.
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