New MEES Regulations
The new MEES regulations put a landlord at risk of substantial fines (up to £150,000) for granting new tenancies or renewing with existing tenants if their buildings do not reach the minimum energy efficiency standards – at least an E rating – landlords are now being forced into making expenditure to improve energy efficiency.
There are exceptions – buildings that do not require an EPC are not subject to the minimum energy standard requirements – and specific exemptions apply.
Broadly speaking, exceptions include holiday lets, tenancies over 99 years or less than six months (provided there is no right for renewal), industrial sites and workshops that have low energy demands (where the indoor climate is not conditioned – heated or cooled – in any way).
Contrary to commonly held understanding, listed buildings are not automatically excepted from the requirement to obtain an EPC. The exception applies only where the carrying out of any necessary works would “unacceptably alter” their “character or appearance”.
Those buildings that require an EPC to be produced may qualify for exemption. These exemptions must be registered and supporting documents must be filed. They are not once and for all exemptions and must be reviewed – broadly every five years. Neither will they automatically pass to a new owner should the landlord transfer the building.
With effect from April 2023 (2020 for domestic property) all buildings that require an EPC and that are subject to existing tenancies will need to either meet the minimum energy efficiency requirements or, alternatively, be exempt.
To avoid the penalties, landlords of low rating buildings should take steps to bring their buildings up to standard or prepare the paperwork necessary to file for an exemption.
In summary exemptions can be filed in the following circumstances:
- If all relevant improvements have been carried out and the and they still don’t improve the energy rating.
- There are no recommended improvements that can be made to achieve a better rating.
- The consent of a third party is needed to carry out any improvements and this cannot be obtained or can only be obtained on conditions that the landlord is not able to comply with.
- Improvements will devalue the property by more than 5%.
- The improvements recommended do not meet the seven-year payback rule – three quotes for the works must show that the cost of purchasing and installing exceeds the savings that could be made over seven years.
- The landlord has only been the landlord for less than six months.
Although exemptions are made on a self-certificate basis and although there are no fees for registration, it is necessary to file sufficient supporting evidence. This, in itself, presents landlords with new onerous and time-consuming duties and all landlords are therefore well advised to review their property holdings with a view to establishing what improvement works might need to be made and whether an exemption can be filed.