On 1 April 2018, the new Minimum Energy Efficiency Standards (MEES) came into force as part of the Government’s initiative to reduce CO2 emissions. It introduces a new minimum standard for the renting of commercial property.  The Energy Performance Certificate (EPC) which sets out the energy efficiency rating of a property must contain a rating of at least band E. Ratings below this of F or G will result in the letting of the property being prohibited.

Exemptions  

An EPC is not needed if the building falls within any of the following categories:

  • Listed and protected buildings where the MEES would unacceptably alter it
  • A temporary building which is going to be used for 2 years or less
  • An industrial site, workshop or non-residential agricultural building that does not use much energy
  • A detached building whose total floor space is less than 50m²
  • A building due to be demolished by the seller or landlord and all relevant planning and conservation consents have been obtained
  • Buildings where the EPC is over 10 years old or where there is no EPC

A building is also exempt if all the following apply:

  • The building is due to be sold or rented out with vacant possession
  • The building is suitable for demolition and the site could be redeveloped
  • The buyer or tenant has applied for planning permission to demolish it

Additional exemptions:

  • Tenancies of less than 6 months with no right of renewal
  • Tenancies of over 99 years
  • The “Golden Rule” – where improvements that could be made would not pay for themselves through energy savings within 7 years on determination by an independent assessor

Exemptions must be registered on the central government PRS Exemptions Register and are valid for 5 years. They are non-transferrable to a new owner or landlord upon sale or transfer of property.

Temporary exemptions:

  • Where any improvements require third party consent before they can be installed on the property e.g. local authority planning consent, consent from mortgage lenders
  • Where installation of specific energy efficiency measures would reduce the market value of the property by more than 5%
  • In certain circumstances where it would be inappropriate or unreasonable for the new landlord to be required to comply with the MEEs immediately. This exemption lasts for 6 months

Penalties for non-compliance

Local Weights and Measures Authorities (LWMAs) will enforce the MEES. The penalty for renting out a property which falls below the minimum standard is a civil fine set by reference to the property’s rateable value. The following rates apply:

  • For a breach of less than 3 months: 10% of the property’s rateable value between £5,000 and £50,000
  • For a breach of more than 3 months: 20% of the property’s value between £10,000 and £150,000

The lease will remain valid between landlord and tenant where the property is let in breach of the MEES or a penalty is imposed.

Further guidance published by the Government can be accessed here.

Florence Clissitt

25th April 2018