MEES: requirements for letting residential properties from 1 April 2020

• United Kingdom

• Health and safety
• Real estate

01-04-2020

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (“MEES Regulations”) provide that from 1 April 2018, it is unlawful for a Landlord of private rented property to grant a tenancy to a new or existing tenant unless the property has an EPC rating of “E” or above. From 1 April 2020 this prohibition on letting substandard property was extended to all tenancies of residential properties meaning a Landlord cannot continue to legally let a residential property unless the property has an EPC rating of “E” or above.

Can I rely on an exemption?

In certain circumstances, a Landlord may be able to continue to legally let an “F” or “G” rated residential property by registering one of the following exemptions:

• the “all improvements made” exemption i.e. the Landlord has spent £3,500 on relevant energy efficiency improvements and the energy rating of the property remains below an “E”;
• the “high cost” exemption i.e. there are no energy efficiency improvements that can be carried out on the property for less than £3,500;
• the “third party consent” exemption i.e. a Landlord is unable to obtain third party consent, for example from the planning authority, lender, superior Landlord or the Tenant to carry out the necessary improvement works to improve the energy efficiency of the property; or
• the “property devaluation” exemption i.e. an independent surveyor determines that the energy efficiency improvements required to the property would devalue the property by more than 5%.

To rely on an exemption, Landlords of substandard residential properties must register the exemption online on the PRS Exemptions Register and provide evidence in support of their application to illustrate how they fall within the exemption. The exemption will be valid from the date of registration and will last for 5 years (or until the current tenancy ends if relying on the consent exemption where consent has been withheld by the Tenant). Upon expiry of the exemption, the Landlord must try again to improve the EPC rating of the property or register another exemption.

Residential Landlords can also obtain a temporary exemption of 6 months in certain circumstances, such as where a Landlord buys a property already subject to a tenancy, where a Landlord is required to grant a tenancy pursuant to a contractual obligation or where a new tenancy is created by operation of law or a court order. In these circumstances a Landlord will have 6 months to improve the energy rating of the property or register an exemption. This temporary exemption also requires registration.

Enforcement

The MEES Regulations are enforced by the local weights and measures authorities who have a range of powers to check and ensure compliance:

• Compliance notice – may be served up to 12 months after the suspected breach, requesting further information to determine whether the Landlord has breached the MEES Regulations.
• Penalty notice – may be served on the Landlord if, in the last 18 months, it has been in breach of the prohibition on letting a sub-standard property, failed to comply with a compliance notice or has uploaded false or misleading information to the PRS Exemptions Register. The penalty notice may also include a financial penalty or publication penalty (or both).
• Financial penalty – the authorities may impose a financial penalty up to 18 months after the breach has occurred. Whilst the authority does have discretion as to the amount of the penalty, it is subject to the maximum penalties set out in the MEES Regulations depending on the type of breach and is subject to an overall maximum penalty of £5,000 per property.
• Publication penalty – the authorities can publish details of the Landlord ’s breach on a publicly accessible part of the PRS Exemptions Register.

Next steps - act now

Landlords of residential properties should review their property portfolios to consider the impact of the MEES Regulations and register exemptions where necessary prior to 1 April 2020. We can assist with this assessment and advise on the requirements of the MEES Regulations together with the applicability of exemptions. Landlords of commercial properties should also be considering the impact of MEES on their property portfolios, particularly given that the prohibition on letting substandard properties will be extended to cover all existing commercial tenancies from 1 April 2023.

With energy efficiency high on the political agenda as part of the government’s commitment to achieving net zero carbon emissions by 2050, Landlords and Tenants of residential properties should be alive to MEES issues particularly given the government has announced its intention to raise the minimum EPC standard for domestic privately rented homes from an “E” to a “C”. A consultation on this is expected later this year.