ENERGY EFFICIENCY 

Minimum Energy Efficiency Standard

 

The Minimum Energy Efficiency Standard (MEES) which came into force in England and Wales on 1 April 2018, applies to private rented residential and non-domestic property and is aimed at encouraging landlords and property owners to improve the energy efficiency of their properties by a restriction on the granting and continuation of existing tenancies where the property has an Energy Performance Certificate Rating of F and G.

 

The Minimum Energy Efficiency Standard Rating is E and above.

 

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (Principal Regulations) as amended by The Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2016 and Energy Efficiency (Private Rented Property) (Amendment) Regulations 2019 enforces the Standard. enforces the Standard

 

An Energy Performance Certificate sets out the energy efficiency rating of a property with recommendations on improving its energy efficiency. Any property which has been marketed or let since 2008 requires an EPC which lasts for 10 years with certain exceptions. See Energy Performance Certificates Guidance.

 

Domestic property

The Standard applies to any domestic privately rented property legally required to have an Energy Performance Certificate let on certain tenancy agreements including Assured Shorthold Tenancies (AST)s, Regulated Tenancies and Domestic Agricultural Tenancies.

 

From 1 April 2018, landlord’s properties which fall into the above categories, may not grant a tenancy to new or existing tenants with an EPC rating of F and G and from 1 April 2020 landlords will not be able to continue letting the property.

 

Where the landlord wishes to continue letting the property which does not meet the Standard, he/she will need to ensure that energy efficiency improvements are made to meet the minimum E rating using any available 3rd party funding arrangements or self-fund up to a £3 500 maximum spending. The spending cap does not apply where third-party funding is available to fully cover the costs of identified improvements.

 

2019 amendment changes the No Third Party Finance Exemption on the National PRS Exemption Register [The Register] from 5 years as stated in the 2015 Regulations to expire on 1 April 2020.

 

Whether a landlord seeks a High Cost Exemption on the Register claiming that an EPC F or G property cannot be improved for £3 500 or less, he/she must submit quotes from three different installers each providing evidence that the cost of the requisite energy efficiency measure is greater, than the spending cap.

 

Guidance

The Domestic Private Rented Property Minimum Standard

Guidance for landlords and Local Authorities on the minimum level of energy efficiency required to let domestic property under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.

 

Non-domestic private rented property

Subject to some prescribed exemptions Part 3 of the Principal 2015 Regulations states that a landlord must not grant a new tenancy (including a renewal tenancy) of a property after 1 April 2018 or continue to let any property after 1 April 2023 where the property has an EPC Rating of F or G.

 

It is not clear who will be responsible for bearing the cost of energy efficiency improvement work ie landlord or tenant. The lease of individual properties should be the first point of reference for both parties on deciding whether energy efficiency improvements are viewed as repairs or improvements. 

 

Where a landlord is granting a new lease he/she may wish to incorporate drafting into the service charges expressly allowing energy-efficiency improvements in the future.

Installation of energy efficiency improvements will only be required for a non-domestic property where the recommended achieves an energy efficiency payback of seven years of less. Unlike residential property there are no third-party funding resources available for improvements and so any improvements will be funded by landlord or tenant.

 

Landlords may be able to claim exemptions in certain circumstances. Such exemptions must be registered on the National PRS Exemption Register.

MEES does not affect existing landlord and tenant obligations including rent reviews, terminal dilapidations and lease renewal.

 

The RICS Insight Paper Minimum Energy Efficiency Standards (MEES): Impact on UK property management and valuation provides an introduction to MEES and the potential impact of the regulations on UK property management and valuation

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