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Minimum Energy Efficiency Standards

Minimum Energy Efficiency Standards (MEES)

The Minimum Energy Efficiency Standards (MEES) Regulations (formerly known as ‘MEPS’) will make it unlawful from April 2018 to let a building in England or Wales, either commercial or domestic, which does not achieve a minimum Energy Performance Certificate (EPC) rating of ‘E’. As poor energy performance is not limited to old or obsolete buildings, MEES will have a significant impact on a number of landlords, tenants and property advisors. Landlords therefore need to take action now to avoid higher compliance costs and protect their property rental values.

In February 2015, the Government released its response to the public consultation on the MEES Regulations which took place July to September 2014. Following parliamentary approval, these Regulations will apply to commercial and residential properties. We focus here on their application to commercial property.

The Requirements

From the 1st April 2018, landlords must not let a sub-standard non-domestic property to new tenants, or renew or extend a tenancy agreement with existing tenants, unless an exemption applies and has been registered on the Exemptions Register (which is not up and running yet). A sub-standard non-domestic property is one which does not meet the minimum level of energy efficiency, currently an EPC band E.

From the 1st April 2023, this prohibition extends to landlords continuing to let a sub-standard non-domestic property to existing tenants (unless an exemption applies and has been registered on the Exemptions Register).

If a landlord lets a sub-standard non-domestic property in breach of this regulation, the validity and enforceability of the tenancy is not affected by the breach (Regulation 30).

Exemptions

Exemptions must be registered on the Exemption Register. An exemption will last for five years and then expire. The landlord will then be required to improve the property to meet the minimum level of energy efficiency. If this still cannot be achieved, then a further exemption may be registered.

The Government will create a central register for landlords to lodge evidence to demonstrate exemptions from MEES. Details of exemptions may be made public and the register will undoubtedly be used to inform compliance enforcement.

The following exemptions are allowed but must be registered (exemptions last 5 years unless stated):

  • Improvement options have a payback period greater than 7 years
  • Consent from external parties could not be granted
  • Tenant consent cannot be granted
  • The improvements will lead to a proven devaluation of the asset
  • Recently becoming a landlord (six month exemption)

Exclusions

Certain types of property are excluded from the requirements.  These include:

  • Temporary buildings with less than 2 years planned use
  • Buildings about to be demolished
  • Stand-alone buildings of less than 50m2

Main Implications of the MEES Regulations

  • Impossible or very difficult to let some properties until they are upgraded
  • Reduced valuations with associated issues with secured lending
  • Rent reviews for ‘F’ or ‘G’ rated properties likely to be affected
  • Potential implications for dilapidations assessments

Non Compliance Penalties

Penalties for non-compliance with these Regulations could be significant. They will largely be based on the rateable value of a commercial property, up to a maximum fine for non-compliance of £150,000.

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