Alexandra Mitchell, Associate at Berry Smith Lawyers, considers how MEES Regulations could affect you.
What are MEES Regulations?
Minimum Energy Efficiency Standards (MEES) are minimum requirements for Energy Performance Certificate (EPC) ratings.
These requirements were introduced to England and Wales by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015./962), Part 3 (MEES Regulations)).
Their aim is to improve the energy efficiency of properties in England and Wales.
How do MEES Regulations affect you?
The first part of the MEES Regulations came into force on 1st April 2018. Under the MEES Regulations it became unlawful for any ‘sub-standard’ commercial property with an EPC rating of lower than an “E” to be leased to new tenants. This did not affect existing tenancies.
However, from 1st April 2023 the MEES Regulations will extend to all commercial property with an EPC rating of lower than an “E” regardless of whether the tenancy was in place before 1st April 2018.
This means not only is it is unlawful for landlords to let a commercial property not meeting the energy efficiency requirements but it is also unlawful for landlords to continue letting a ‘sub-standard’ commercial property without improving the property’s energy efficiency to at least an EPC rating of an “E”.
Landlords will be required to carry out necessary improvements before this date in order to ensure that any commercial property they are letting meets these standards.
Failure to comply with the MEES Regulations without a legitimate reason (registered validly on the PRS Exemptions Register) could result in landlords facing enforcement action along with hefty fines of up to £150,000.
Do MEES Regulations apply to your properties?
MEES Regulations will apply where the commercial property is ‘sub-standard’ meaning it has an EPC rating of lower than an “E”. The property also must be a ‘non-domestic private rented property’ meaning it meets the following criteria:
- The property is situated in England and Wales;
- It is let under a qualifying tenancy (not a short or very long tenancy);
- It is not a dwelling; and
- It is required to have an EPC.
Legitimate reasons are if no energy efficiency improvements can be made to the property or if all relevant energy efficiency improvements for the property have been made but the property continues to be classed as ‘sub-standard’. Another legitimate reason is where energy efficiency improvements will not cause energy bill savings over 7 years of at least the same amount as the cost of having the works done
There are also three exemptions under Part 4 of the MEES Regulations – a consent exemption (where third-party consent is required and cannot be obtained), a devaluation exemption (where the energy efficiency improvement would result in a reduction in the market value of the property or building of more than 5% evidenced by an independent surveyor’s report) and a temporary exemption (where the landlord requires 6 months to comply with the MEES Regulations). The exemptions are time limited and the MEES Guidance states that they cannot be passed on from landlord to landlord.
In these circumstances the landlord must enter the relevant details of the legitimate reason on the PRS Exemptions Register to ensure they avoid a fine or enforcement action.
What do you need to do?
If the MEES Regulations do apply the landlord must carry out energy efficiency improvements unless they have registered on the PRS register due to a legitimate reason or exemption.
Energy efficiency improvements to improve a commercial property’s EPC rating include work such as installing double glazing, replacing the boiler or installing wall insulation.
Landlords will need to ensure that their properties meeting the criteria have at least an “E” rating to avoid enforcement action and fines.
When purchasing commercial properties landlords will need to ensure that they are careful when it comes to EPC ratings and that they consider the energy ratings before purchasing. Even if there is an exemption validly registered these cannot be passed from landlord to landlord so it is important landlords are fully aware of the property’s EPC rating.
Landlords will also need to be cautious when agreeing to tenants carrying out any work to the property to ensure that the work does not mean the energy efficiency level drops to a ‘sub-standard’ level.
It may be worth landlords obtaining up to date EPCs now for properties they think may be affected so they can start to arrange the improvements should they be necessary. Even properties with “E” ratings should be considered in case their rating drops on the following EPC exposing the landlord to potential enforcement action and fines. Landlords need to be mindful that the MEES Regulations could also become stricter in future and request ratings higher than an “E”.
The MEES Regulations may also affect tenants who may have to vacate properties whilst improvement works are completed. Furthermore, should tenants underlet properties they will also need to keep the MEES Regulations in mind.
Landlords will likely be keen to attempt to pass the improvement costs on to tenants arguing that they are the ones receiving the benefit with reduced energy costs. This could be by service charges or including obligations in leases for tenants to carry out the works. Tenants are unlikely to be agreeable to this! Whilst leases will normally contain obligations on to tenants to carry out certain works in order to comply with statute, it is unclear as to whether the MEES Regulations are caught by this. Both landlords and tenants need to bear the allocation of potential costs of complying with the MEES Regulations in mind when negotiating new leases or renewal leases. Specialist legal advice as always is vital.
ABOUT THE AUTHOR
Alexandra Mitchell is an Associate in the Commercial Property Department at Berry Smith Lawyers.
Tel – 029 2034 5511
Email – firstname.lastname@example.org