Landlords: Are Your Properties Ready for the Minimum Energy Efficiency Standards?

Landlords: Are Your Properties Ready for the Minimum Energy Efficiency Standards?

On the 1st of April 2018, a new piece of legislation called the Minimum Energy Efficiency Standards (MEES) will be introduced into law, in an effort to make property in the UK more energy efficient.

MEES was first introduced by the Energy Act 2011, with the government publishing new guidelines for property owners, which included a date after which it will be unlawful for landlords to let a property if it does not meet the new standard.

That means starting from April, Landlords who let properties in England and Wales must ensure that their properties meet a minimum Energy Performance Certificate (EPC) standard.

The good news is, you might have a little extra time, depending on your rental situation. Whilst all new domestic and non-domestic lettings and lease renewals from April the 1st will need to comply to MEES, if you currently have tenants who are planning on renting with you long-term, you will not be required to comply with MEES until the 1st of April 2020, whilst all existing non-domestic leases will need to comply by April 2023.

It is also worth noting that these regulations do not apply to places of worship, temporary buildings, and tenancies of over 99 years or less than six months with no right of renewal.

So what exactly does MEES Change?
Under the new regulations, the minimum EPC rating that a property can have is an E rating or above. Any property with an EPC rating of F or G will be legally considered as sub-standard, which will make it unlawful for you to rent or lease. Your local authority will be responsible for enforcing the regulations, as well as deciding on the penalty that you will incur.

Statistics currently show that nearly 20% of commercial properties and one in ten residential properties currently have an EPC rating of F or G, meaning many properties are current non-compliant. Guidelines currently recommend that local authorities punish landlords with a fine dependent on the amount of time that has expired since the breach occurred. If it is less than three months, residential landlords can be fined up to &2,000 whilst commercial landlords could be hit with a maximum fine of &50,000. If the breach occurs for more than three months then residential landlords can be fined a maximum of &4,000 whilst a commercial landlord can be fined up to &150,000.
Additionally, the breach will be published in the exemptions register for a minimum of 12 months.

Are there any other implications?
A sub-standard EPC rating will make it harder for you to sell a property, as savvy buyers look to get the best possible deal when it comes to buying a new home. If your property isn’t up-to-standard, you might see lower offers than your asking price, as buyers look to offset the cost of bringing it up to standard.

So what can I do?
Firstly, you need to ensure that your current EPC rating is correct. Statistics show that 70% of EPC ratings are incorrect, mainly due to the fact that they are valid for ten years. You should consider hiring a professional to conduct an up-to-date assessment, just to be safe.

If the assessment shows that your property is sub-standard or close to it, you will then need to make some upgrades. An EPC always comes with recommendations for how to improve the property’s rating. Obviously, with the deadline now looming, you will need to undertake the work to improve your property as quickly as possible. For those with an existing tenancy, you can take advantage of the situation, and hold off making improvements until the end of the tenancy. However, that means you won’t be able to put it back on the market until you upgrade the property.

It could be mutually beneficial to work alongside the tenant to get the work completed (for example installation of double glazing or insulation, changing drafty doors, etc.) however this can be quite intrusive work for tenants, so you will need to make the incentives clear and get their consent before making the improvements.

Are there any exemptions?
There are several exemptions to MEES for special cases such as:

• The improvements are deemed a poor investment or financially unviable as they do not pay for themselves in reduced energy costs savings with seven years.

• If a property is listed, a historical building or in a conservation area. This is a strict exemption and only applies if the recommended changes would ‘unacceptably alter the character or appearance’ of a building.

• If an independent surveyor determines that making the improvements would reduce the property’s market value by more than 5%.

Exemptions are not automatic. You must register them with the central government PRS Exemption Register. The exemption will only be valid for five years.

For more information regarding the Minimum Energy Efficiency Standard and how it affects your properties, get in touch with Coldwell Banker Southbank.