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14-03-2019

Associate Barnaby Heap from Moon Beever's commercial property department examines the minimum energy efficient standards.

 

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What is the Minimum Energy Efficiency Standard (MEES)?

On the 1st April 2018 the Minimum Energy Efficiency Standard or MEES came in to force. This legislation made it unlawful to let non-domestic privately rented property with an Energy Performance Certificate (“EPC”) rating of F or lower.

Non-domestic privately rented property covers most, but not all, commercial property.

What are the penalties for non-compliance?

If the property is rented out for a period less than three months in breach of the MEES Regulations then the penalty will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000.

After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 up to a maximum of £150,000.

The lease will however remain in force and the obligations be binding on the parties even if the letting is in breach of the regulations.

What are the exemptions?

Landlords can let a property to which the MEES Regulations apply but which is below the minimum standard in the following circumstances:

  1. Where consent is required from a third party (i.e. Superior landlord, tenant or planning authority). In particular and in accordance with Regulation 5((a) there may be an exception to the obligation to produce an EPC where a building is “officially protected as part of a designated environment or because of their special architectural or historical merit, in so far as compliance with certain minimum energy performance requirements would unacceptable alter their character or appearance”.  On this basis Listed Buildings, as an example, may be exempt from the provisions of the regulations but consultations should be undertaken with local authority conservation officers if there are any queries in this regard.
  2. If it is that efficiency measures would decrease the property’s value by 5% or more.
  3. If an independent assessor determines that all relevant energy efficiency improvements have been made to the property or that improvements that could be made but have not been made would not, through the subsequent energy savings, pay for themselves within seven years. This is known as the “Golden Rule” exemption.

Separately tenancies for terms of less than 6 months (with no right of renewal) or tenancies with terms exceeding of 99 years will also be exempt from the regulations.

Landlords will need to register exempt properties on the PRS Exemptions Register which will be available for public inspection.

General marketing observations

Landlords should now review their property portfolios to understand which properties are within the scope of the legislation (and what exemptions might apply). It would also be prudent to thoroughly review the current letting documentation to understand how future lease terms, break dates, renewal dates and planned refit periods may be affected by the MEES regulations and Moon Beever would be able to assist in such a review.

Finally, Landlords who do introduce measures to improve the energy ratings of their property may in all likelihood enhance the value of their assets and accordingly increase the potential rental income.

Further general advice and guidance may be found by clicking here.

To speak to Barnaby about this matter, or any property related matter (be that commercial or residential), please click here.

This article was created for general guidance and should not be regarded as formal, legal advice. You are recommended to take specialist, legal advice in respect of individual matters.

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