On 5 February 2015 the government published its response to last year’s consultation on the forthcoming Minimum Energy Efficiency Standard Regulations (the “MEES regulations”) together with draft regulations that are awaiting approval from both houses of Parliament. This article assumes that they will receive approval in their published form, which may happen before Parliament ends on 30 March in readiness for the general election on 7 May.
The MEES regulations will apply to both residential and commercial properties; however, there are significant differences between the two different schemes. In this article, the term MEES means the Minimum Energy Efficiency Standard as it applies to commercial properties.
1. MEES will require a property to be brought up to an E rating
Compliance with MEES entails bringing a property up to the minimum EPC rating, which has been set at E as anticipated. A property that has an EPC rating below that level is termed “sub-standard” in the draft regulations.
2. MEES will apply to new lettings from 1 April 2018
MEES will apply to the grant of a lease on or after 1 April 2018. This includes lease renewals (where an EPC exists). Normally the landlord will need to ensure compliance with MEES before the lease is granted. However, in certain situations, the landlord will have six months after the lease is granted to comply: these are broadly those lettings (including lease renewals) where the landlord had no choice whether to grant the lease.
3. MEES will also apply to existing leases from 1 April 2023
From 1 April 2023 MEES will be extended to apply to all let properties, whenever the lease was granted – but only if the property has a valid EPC on the relevant date. There is no exemption just because an EPC was obtained voluntarily. Equally there is no obligation to obtain an EPC if one does not already exist.
4. Properties that do not need an EPC are not within the MEES regime
MEES applies only to properties that require an EPC under the EPC regulations or the Building Regulations. This may therefore exclude listed buildings – if the wording of the relevant provision in the EPC regulations is corrected to match the exemption in the underlying EU Directive. MEES also does not apply to very short lettings or to lettings of 99 years or more.
5. Landlords will be exempt after all possible cost-effective improvements have been carried out
This is the most complicated part of the MEES regime. Broadly, landlords will be exempt from reaching the minimum standard – for five years – where they have carried out all possible cost-effective improvements. This may be established by using the Green Deal’s “golden rule” or under a new provision that requires certain improvements to pay for themselves within no more than seven years. How this will operate in practice is not yet clear; guidance is to be provided by DECC.
6. Landlords will be exempt if third party consents are not available or if compliance would devalue the property
Landlords will be exempt – again for five years – if they cannot obtain a necessary consent from a third party (such as a lender, tenant or planning authority) or if compliance would devalue the property by 5% or more.
7. An exemption from MEES may not transfer to a buyer
This is a new and unexpected provision. From 2023 it appears that a successor landlord of a sub-standard property will either need to bring a property up to an E rating within six months of acquisition or establish a new exemption.
8. Exemptions will need to be logged on a register
DECC is to create a centralised register on which landlords will need to log evidence of exemption from MEES. Details of exemptions will be made public; everyone will know that a building is sub-standard.
9. Penalties for breach could be significant
Enforcement will be the responsibility of local authorities and penalties for breach of MEES could be significant: up to £150,000. The regulations do not state whether local authorities will be permitted to keep the proceeds of penalties; if so, it will incentivise them greatly to enforce the regime.
10. The government will review MEES in 2020
There was a suggestion that the EPC rating should be progressively raised over time, to encourage long-term investment in energy-saving measures. The government has not gone down this path and instead says that MEES will be reviewed in 2020.
A separate article will be published explaining the scheme for residential properties.
Key points
• MEES will require a property to be brought up to an E rating
• MEES will apply to new lettings from 1 April 2018
• MEES will also apply to existing leases from 1 April 2023
• Properties that do not need an EPC are not within the MEES regime
• Landlords will be exempt after all possible cost-effective improvements have been carried out
• Landlords will be exempt if third party consents are not available or if compliance would devalue the property
• An exemption from MEES may not transfer to a buyer
• Exemptions will need to be logged on a register
• Penalties for breach could be significant
• The government will review MEES in 2020
Peter Williams is a lecturer and trainer at Falco Legal Training
