New minimum energy efficiency standards for private rented properties – in force 1 April 2018
From 1 April 2018, landlords of buildings within the scope of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the “MEES Regulations”) must not renew existing tenancies or grant new tenancies if the building has less than the minimum energy performance certificate (EPC) rating of ‘E’ UNLESS the landlord registers an exemption.
After 1 April 2020 for residential properties and after 1 April 2023 for commercial, landlords must not continue to let any buildings which have an EPC rating of less than ‘E’ unless the landlord registers an exemption.
The MEES Regulations do not apply to:
- buildings that are not required to have an EPC (for more information see our previous article on EPCs);
- buildings where the EPC is over ten years old or where there is no EPC;
- tenancies of less than six months (with no right of renewal); or
- tenancies of over 99 years.
For domestic property there is a ‘no cost to landlord’ principle for making improvements to a property but this is being reviewed with a view to replacing it with a capped landlord financial contribution element that would take effect where a landlord is unable to obtain suitable third party funding. The consultation for this review closes on 13 March 2018.
If a landlord wants to register an exemption, it must fit into one of the following three categories:
- The ‘Golden Rule’: an independent assessor determines that:
- all relevant energy efficiency improvements have been made to the property; or
- those improvements that could be made but have not been made would not pay for themselves through energy savings within seven years.
- Devaluation: an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%.
- Third Party Consent: consent from persons such as a tenant, a superior landlord or planning authorities has been refused or has been given with conditions with which the landlord cannot reasonably comply.
All exemptions must be registered on the central government PRS Exemptions Register. The exemptions are valid for five years only and cannot be transferred to a new landlord.
The penalty for renting out a property for a period of less than three months in breach of the MEES Regulations will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000.
After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.
The government has produced guidance on the MEES Regulations which can be found here: https://www.gov.uk/government/publications/the-private-rented-property-minimum-standard-landlord-guidance-documents
For more information please contact Emma Smart.