Minimum Energy Efficiency Standards (MEES) Regulations: An Introduction for Commercial Landlords

Energy Performance Certificates (EPC’s) were first introduced in England and Wales in 2007 for residential properties. The requirement for non-domestic and commercial properties to have an EPC on construction, sale or rental was phased in starting in 2008. Until now, energy performance regulations have done little more than require commercial landlords to simply obtain an EPC. However, this is set to change with the implementation of the minimum energy efficiency standards (MEES).

New Regulations

The MEES was introduced in 2015 by the Energy Efficiency Standards (Private Rented Property) (England and Wales) Regulations (“the MEES Regulations”) 2015. The new regulations introduce stricter requirements on commercial landlords, with potentially heavy penalties for non-compliance.

The changes brought about by the MEES Regulations will be implemented in a number of phases. The key dates are:

• 01 April 2018: from this date, landlords of buildings that are covered by the MEES Regulations must not renew existing leases or grant new leases unless the building has an EPC rating of E or above, unless an exemption applies and the landlord registers that exemption.
• 01 April 2020: from this date, residential properties which are subject to an existing lease must not continue to be let unless they meet the MEES of band E.
• 01 April 2023: from this date, commercial properties which are subject to an existing lease must not continue to be let unless they meet the MEES of band E.

Which properties are covered by the MEES Regulations? This is a surprisingly complex question to answer. To determine if your property comes within the scope of the MEES Regulations, it is necessary to consider both the Energy Performance of Buildings (England and Wales) Regulations 2012, as well as the MEES Regulations themselves.

The MEES Regulations will not apply to:

• Short Leases of a fixed term of 6 months or less;
• Long Leases with a term of over 99 years;
• Properties where the EPC is over 10 years old, or where there is no EPC;
• Buildings which are exempt from the requirement to have an EPC (these include non-residential agricultural buildings, workshops, industrial sites and some listed buildings).

Battens will be able to advise you on whether your property is covered by the MEES Regulations.

Exemptions

If a property falls under one of the exemptions, the landlord will not have to bring the property up to a band E rating before letting the property. It is important to remember that most of the exemptions must be registered by the landlord with the national PRS exemptions register to avoid falling foul of the MEES Regulations.

1. The Green Deal’s “Golden Rule”: the expected saving must be greater than the cost of carrying out the works. More specifically, the works must be expected to pay for themselves within seven years.
2. Devaluation: if the property is likely to be devalued by more than 5% as a result of the works, the exemption can be registered. The exemption will last 5 years from registration.
3. Third Party Consent: if the Landlord requires the consent of a third party, such as a tenant, a superior landlord or the Local Authority, and such consent had been refused, the landlord is not required to carry out the work. This exemption only applies to the works which require the consent, and not to other works. If there is a tenant who is refusing consent, the exemption will no longer be relevant if the tenant ceases to be in occupation.
4. Unsuitable measures: if a surveyor certifies that the relevant works would negatively impact the fabric or the structure of the property, the landlord is not required to undertake the works. The exemption last five years from registration.
5. General exemption: if the landlord has undertaken all relevant works and the rating of the building is still below band E, he is exempt from the MEES requirements. The exemption will need to be registered.

Penalties

The MEES regulations will be enforced by Trading Standards and Landlords who act in contravention of the MEES Regulations may be liable to a fine, the extent of which will depend on the time for which the breach has lasted:

• Less than 3 months; the greater of £5,000.00 or 10% of the rateable value with a maximum fine of £50,000.00.
• 3 months or more; the greater of £10,000.00 or 20% of the rateable value with a maximum fine of £150,000.00.

The regulations also say that the names of those landlords who breach the MEES Regulations will be published, which will include those landlords who have provided false or misleading information on the register.

How does it affect you?

When entering into new leases, all parties should consider the implications of the new MEES requirements. The landlord in particular should consider whether the service charge provisions in the lease deal adequately with the division of responsibilities and therefore the cost of carrying out the works required between the landlord and the tenant.

It is important to plan ahead. Although the next round of changes will only affect new leases, in another five year times the MEES will also apply to existing leases. Battens can help you plan ahead to ensure that you are prepared for the coming changes.

For more information or if you have any questions please contact Anna Austin on 01935 846214 or email anna.austin@battens.co.uk