Government Consulting on Key Changes to Strengthen the MEES Regulations

• United Kingdom

• Environment
• Litigation and dispute management
• Real estate
• Real estate dispute resolution

24-03-2021

Back in 2019 the Government consulted on proposals to tighten the minimum energy efficiency standard applicable to the letting of non-domestic buildings from grade E to B by 2030. Following significant support for that proposal the Government has recently opened a further consultation looking at the framework to implement this change.

Having set a target to achieve net zero emissions by 2050 it is no surprise that the Government has turned its attention again to emissions from building stock which account for 31% of our national emissions.

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the “MEES Regulations”) were designed to incentivise energy improvement work by introducing a requirement that a non-domestic property could not be let unless it had a minimum rating of E unless all cost effective improvements had been carried out and the property remained below an E grade, or unless an exemption applied.

However, there are a number of inconsistencies between the MEES Regulations and the Energy Performance of Buildings (England and Wales) Regulations 2012. Enforcement has also had its challenges. A pilot study in relation to enforcement identified a number of issues including the high degree of resources required to identify properties which are potentially non-compliant, the small time window to enforce at the point of letting and often the transaction had occurred before the Local Authority became aware of any potential breach.

The MEES Regulations do not work particularly well in the context of shell and core buildings which represent a large proportion of new lettings. Furthermore at present the legal obligation lies on the Landlord and they may find it difficult to place strict requirements on fit out works which tenants may subsequently carry out.

There has also been uncertainty around Listed Buildings and whether they require an EPC in the first place.

Key Proposals Raised by the Consultation include:

• a phased implementation ie there will be an interim requirement that buildings must be at least grade C by 2027

• a two year compliance period and a move away from the point of letting as the point of enforcement – Landlords will be expected to submit to the new PRS Exemptions and Consent database a valid EPC 2 years prior to the relevant enforcement date ie 1 April 2025 and 1 April 2028. If the EPC is below C in 2025 or B in 2028 the Landlord then has 2 years to carry out works and commission a further EPC which must be submitted by 1 April 2027 and 1 April 2030 respectively

• the introduction of a 6 month temporary exemption for properties let on a shell and core basis

• perhaps most significant - the requirement to continually have a valid EPC in place

• Landlord to be required to provide a valid EPC to a letting agent before a property is placed on the market

• requirements on letting agents and online property platforms to only advertise and let compliant properties

• new duties on tenants regarding compliance with the MEES Regulations and a duty to co-operate

• requirement that all Listed Buildings and those in conservation areas which are to be rented should have an EPC

• simplification of the 7 year payback test by notably removing the requirement for 3 different quotations and introducing a payback calculator

• creation of a PRS Exemptions and Consent database

• some changes to the penalty framework

What does it mean for me?

Whether you are a Landlord or a tenant these changes are extremely far-reaching. The government is putting industry on notice to look at the state of its buildings and to start to plan ahead for these changes which are coming – first of course in 2023 when the requirement for a property to have a minimum grade E EPC applies to all properties which are let which are required to have a valid EPC. 

Now is the time to:

• review your portfolio and get an understanding of its position in relation to EPC ratings

• be considering the works which will be required pre-2023, pre-2027 and pre-2030

• review the consultation and consider responding by 9 June 2021

On any new letting, consider carefully what the position is in relation to EPC/MEES noting that tenants may find they subsequently have their own obligations in relation to compliance with MEES.

For further information please contact: