From 1 April 2018 the Minimum Energy Efficiency Standard regulations (MEES) prohibit a new letting of a commercial property that has an EPC rating of F or G unless an exemption has been validly registered.
Further it will not be possible to continue to let a commercial property unless it has an EPC rating of E or above from 1 April 2023 (unless an exemption has been validly registered).
If you have a property that has an EPC rating of F or G, to let the property on a new letting or continue to let the property, you will need to have carried out the necessary energy efficiency improvements to bring the property up to at least an EPC rating of E. However, works only need to be made that pay for themselves within 7 years.
You are able to register an exemption from complying with MEES if:
- You have carried out all relevant energy efficiency improvements to the property and it still does not have an EPC rating of at least E, or, there are no energy efficiency improvements that could be made to the property. This exemption lasts for 5 years.
- You are unable to obtain consent to the energy efficiency works from the tenant or another third party from whom consent is required. This exemption lasts for 5 years.
- You have obtained a report prepared by an independent surveyor which states that making the relevant energy improvement would result in a reduction of more than 5% in the market value of the property or the building of which it forms part. This exemption lasts for 5 years.
- You have become the landlord to a property subject to a lease either through purchasing the property or some other reason such as a lease renewal pursuant to the Landlord and Tenant 1954 Act. This exemption lasts for 6 months.
At the end of each exemption period you will either have to register a further exemption or carry out the energy efficiency works required.
You cannot rely on an exemption unless it is registered in the Exemptions Register. An exemption is not transferable and can only be relied on by the landlord who registered it.
It is important to remember that if your property does not have and is not required to have an EPC you are not required to comply with MEES. In addition, MEES does not apply to:
- A property that either has no EPC or has an EPC which is more than 10 years old
- A property let on a tenancy for 6 months or less (with no right of renewal)
- A property let on a tenancy for 99 years or more.
If you let a property in breach of MEES you could receive a financial penalty on a graded scale up to £150k and/or a publication penalty. A publication penalty involves inclusion of your details, the details of the breach and the property concerned in the publicly accessible part of the Exemptions Register.
The legislation allows the government to move the goal posts and raise the minimum EPC level that a property must have before it can be let. It seems the government may use these provisions as the Clean Growth Strategy sets out policy/plans for a tougher minimum energy efficiency standard. This is a cause for concern, with estimate that 47% of commercial properties currently have an EPC rating of C or D.
There are a number of issues raised by the MEES regulations and compliance. Look out for our series of blogs on issues such as lease renewals, whether the cost of compliance with MEES can be passed to the tenant and the potential impact of MEES on dilapidations, alterations and rent review.
This blog outlines the basics of MEES if you have any questions or would like further information please contact a member of the Real Estate Team.
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