It’s been exactly a year since Minimum Energy Efficiency Standards (MEES) came in to force. Applicable to both domestic and commercial property, they impose a prohibition on the landlord of domestic property from unreasonably withholding its consent to the tenant making energy efficiency improvements at its own cost. This regime came into force on 1 April 2016 and applies regardless of what the lease may specify regarding restrictions on tenant's alterations or improvements.
The standards also prohibit landlords from letting their property if it has an EPC rating of F or G (called "substandard property" in the MEES Regulations) with effect from the following key dates:
- from 1 April 2018, where the landlord wants to grant a new lease, or renew or extend an existing lease, whether of domestic or commercial property;
- from 1 April 2020 for all domestic property where the landlord has an existing lease in place; and
- from 1 April 2023 for all commercial property where the landlord has an existing lease in place.
In each case, the landlord cannot let their property without carrying out improvement works to raise the rating to E or above or, where appropriate, registering an exemption. For domestic properties, the exemption is available if, even after having spent £3,500 on improvements, this is not sufficient to raise the rating to E or above. For commercial properties, the exemption is available if the cost of improvements does not satisfy a 7 year payback test, i.e. where the capital cost of required efficiency measures is not cost-effective (in reduced energy costs) within a 7 year period.
The MEEs regulations apply to properties with EPC ratings and consequently do not apply to properties where there is no EPC, which results in the bizarre situation where seemingly the regulations do not apply to a property where there is no EPC, even if one should have been obtained!
Landlords need to be aware of the age of their EPCs. If they are old and now reaching the end of their shelf life (10 years), landlords may receive a nasty surprise when they are renewed, as efficiency standards have increased over the years with the result that properties rated D or E 10 years ago may now only merit an F or G rating. Prospective tenants will be well advised to demand an up to date EPC if the existing one is a few years old.
There are, however still some uncertainties. It is unclear whether:
- the sale of letting of a listed building or a building in a conservation area requires an EPC, hence whether MEEs apply. The safe approach assumes that it does and they do;
- lease renewals of commercial properties, where there is no EPC, will in future require an EPC, meaning that MEEs do not apply. Government guidance seems to suggest it will not and they do not.
Finally, the minimum energy efficiency standard is E, but it is widely expected that this will be raised to C by 2030 although there is no legislation to this effect yet. Government consultation is expected on this in the near future.
Richard Wheeldon is a Senior Consultant in Berwins; industry ranked Property team.