The minimum energy efficiency standards contained within The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI2015/962) (“the MEES Regulations”) were implemented by the Energy Act 2011 and were introduced as a way to try and reduce the UK’s greenhouse gas emissions, by improving the energy efficiency of privately rented commercial and residential buildings in England and Wales.
The MEES Regulations introduced a minimum energy performance certificate (EPC) rating required on commercially let properties of E or above and landlords must take steps to ensure their properties meet this. If a commercial property is rented out and the EPC rating falls between F-G, this will fall below the required minimum and letting the property will be unlawful (unless the landlord has registered an exemption).
When do the MEES Regulations apply to commercial properties?
The MEES Regulations will apply to non-domestic privately rented property that is:-
- situated within England and wales;
- let on a qualifying tenancy (the MEES Regulations do not apply to tenancies of 6 months or less or of 99 years or more. The MEES Guidance also indicates the MEES Regulations do not apply to properties occupied under a licence);
- not a dwelling (the EPC Dwellings Guidance describes a dwelling as “a self-contained unit designed to provide living accommodation for a single household” not sharing kitchen or bathroom facilities); and
- required to have an EPC.
What do the MEES Regulations mean in practice?
A landlord cannot grant a new tenancy or extend or renew an existing tenancy on or after the 1st April 2018 if the property has an EPC rating of F-G. The MEES Regulations also prohibit landlords from continuing to let a property on or after 1st April 2023 if the property has an EPC rating of F-G.
Under the MEES Regulations, if a commercially let property does not meet the minimum energy standard; the landlord will be open to enforcement action unless they have a legitimate reason permitted under the MEES Regulations.
A landlord will have a legitimate reason to continue to let or grant a lease of a sub-standard rated commercial property if either:-
- all the relevant energy efficiency improvements have been made and the property rating remains sub-standard; or
- an exemption applies.
If a landlord continues to let a sub-standard property under one of the two above scenarios, then they must ensure that the details have been entered on the PRS Exemptions Register to avoid enforcement action. This will allow the landlord to continue to let the property or grant new leases for up to a further five years.
Exemptions
There are three exemptions that a commercial landlord may be able to rely upon if their property’s EPC rating falls between F-G:-
- The Consent Exemption – a landlord can request an exemption if the energy efficiency improvements require third party consent which has either been denied or granted subject to conditions that the landlord is not reasonably able to comply with;
- The Devaluation Exemption – a landlord can request an exemption if they have obtained a report from an independent surveyor advising that the installation of specific energy efficiency measures would reduce the market value of the property or building by more than 5%;
- The Temporary Exemption– in certain situations, new landlords can be granted a temporary exemption of 6 months in order to assess what energy efficiency improvements are needed.
If a landlord relies on one of the above exemptions, during the exemption period they must continue to consider whether the exemption still applies or whether they must make any energy efficiency improvements before it expires.
Enforcement Action
Penalties may be brought against landlords if they continue to let sub-standard rated properties or grant a new lease following the relevant dates of enforcement set out within the MEES Regulations. The potential penalties for non-compliance with the MEES Regulations could be one or both of the following:-
- Financial penalties – the landlord could be fined for letting or continuing to let a sub-standard property, registering false or misleading information within the PRS Exemptions Register or failing to comply with a compliance notice. Sums can range from £5,000.00 – £150,000.00; and/or
- A publication penalty – details about the breach could be entered on to the publicly accessible part of the PRS Exemptions Register. The information will remain on the register for a minimum of 12 months.
Lettings of sub-standard rated properties
If a commercial property has an EPC rating of F-G and is rented out, the lease will still be valid and enforceable and neither party can terminate the tenancy due to the sub-standard rating.
The MEES Regulations do not oblige landlords to carry out any energy efficiency works on sub-standard rated properties; the main motivation to comply would be to avoid enforcement action.
The future
Landlords should be aware of the EPC ratings of their commercially let properties to ensure they are rated E or above to comply with the MEES Regulations. If the property has a sub-standard rating of F-G and the landlord has a legitimate reason to continue to let the property or grant a new lease, they must register the relevant details on the PRS Exemptions Register to avoid potential enforcement action.
For more information, contact Anna Duffy on 01244 354800 or email anna.duffy@dtmlegal.com
