If you’re a private landlord you need to know that in April 2018, a law was rolled out to the private rented sector, which was called the Minimum Energy Efficiency Standards (MEES). At the time, the government estimated that 7% of domestic and 18% of commercial properties held the lowest EPC ratings of F or G. According to MEES private rented properties needed to have an Energy Performance Certificate (EPC) rating of a minimum of an E for newly rented properties and new tenancy agreements.
From the 1st April 2020, it will be unlawful for any private landlord to rent a domestic property, even to an existing tenant if the property is below E rated on an Energy Performance Certificate (EPC).
Penalties for domestic landlords are as follows: if a landlord has let a sub-standard property that is in breach of the regulations for up to three months, they face a financial penalty of up to £2,000 and a possible publication penalty. For three months or more, they face a financial penalty of up to £4,000 and a possible publication penalty. For commercial landlords the penalty for renting out a property for a period of fewer 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. And for more than three months can mean a fine of 20% of the property’s rental value, to a maximum of £150,000. After April 2023, landlords will not be allowed to let any commercial buildings which have an EPC rating worse than E.
As you see a low EPC rating could have profound financial implications on landlords, who will need to consider the cost of upgrading fittings, insulation and so on, as well as the loss of income that results during the renovation period. Unless a premise is eligible for EPC exception, compliance with MEES is mandatory.
MEES does not apply to buildings:
- Not required to have an EPC (non-residential agricultural buildings, industrial sites and workshops, some listed buildings, temporary properties)
- With tenancies of less than 6 months (with no right of renewal).
- With tenancies of more than 99 years.
Landlords will be exempt from having to comply with MEES if they can demonstrate one of the following:
- All cost-effective energy efficiency improvements, either within a seven year payback or under the Green Deal’s “Golden Rule”, have been carried out.
- Consent to undertake works is refused by a third party, such as a Local Authority or an incumbent tenant.
- A suitably qualified expert provides written advice that the improvements would result in a devaluation of the property by 5% or more, or that the works would damage the property.
- Exemptions last for five years and will need to be lodged on a centralised register to be created by Government
With the implementation of the minimum energy standards legislation we suggest the following immediate actions:
- All property assets need to have a valid EPC.
- Where the EPC rating is ‘F’ or ‘G’ (or is at risk of becoming so) an “Energy Efficiency Plan” should be put in place to improve the energy efficiency of the property. This should include assessing the costs and benefits of improving energy efficiency and weighing these against other impacting factors within the business plan for the property.
- Energy efficiency improvements should take advantage of void periods, lease breaks and/or be included as part of the on-going maintenance and renewal programme.
We know that it can be difficult to know where to begin when it comes to creating and implementing an energy efficiency plan, and with the MEES deadline looming it’s important that landlords are prepared. Energy management is an ideal way to cut operating costs in the long run. Property owners have adopted economic upgrades like switching to renewable energy sources that improve the EPC grade without necessarily altering the building’s properties.
QuinnRoss Energy will ensure your organisation meets all legislative obligations and we will aim to identify extra savings and benefits to mitigate upcoming incremental costs.
For advice on meeting MEES requirements and managing energy consumption in your building, please feel free to contact us.