MEES Regulations Are Changing – What Does This Mean?
Important date for residential landlords looming – 1 April 2020
As owners of buy-to-let properties should by now be aware, a key date is fast approaching on the horizon, namely 1 April 2020 when further provisions of Part 3 of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (MEES Regulations) come into effect.
For those that do not already know, the effect of the relevant provisions of the MEES Regulations is to make it unlawful for landlords of sub-standard domestic privately rented (PR) property to continue to let such properties after 1 April 2020. It has been unlawful for landlords to grant new tenancies of such properties since 1 April 2018.
Why do the MEES Regulations exists?
The Government is subject to an obligation to improve the energy efficiency of both residential and commercial PR property as required by the Energy Act 2011. Whilst the MEES Regulations do not actually impose a positive obligation on landlords to make energy efficiency improvements to their properties, that is the effect of the MEES Regulations if landlords wish to continue receiving an income stream from their properties.
What is a domestic PR Property?
It is a property which is let under a qualifying type of tenancy which is not of an excluded type of property, is not let by an excluded landlord and is required to have an Energy Performance Certificate (EPC). So, in summary, this is not as straightforward a question as one might initially think and each aspect of the property, the landlord and the tenancy itself will need to be considered.
What is meant by “sub-standard” domestic PR property?
This is any domestic PR property whose EPC rating from a valid EPC is below the minimum energy efficiency standard (MEES). The current MEES is an E rating. So, at present, properties rated F and G are sub-standard which is estimated to be around 10% of domestic PR property. However, the MEES is likely to be increased in increments to a C rating by 2030.
What if the tenant wants to undertake improvements?
Part 2 of the MEES Regulations gives the tenant of some types of domestic PR property a right to request landlord’s consent to the tenant making energy efficiency improvements to the property. It also requires the landlord not to unreasonably refuse consent to the improvements being made, even if the lease prohibits such alterations.
What are the penalties for non-compliance?
The landlord will be liable to enforcement action which may be either or both of the following:
(a) Financial penalty. At present, this could be to a maximum of £4,000; and/or
(b) Publication penalty. This is where details about the breach are entered on the PRS Exemptions Register. This may result in adverse publicity for the landlord and make a prospective purchaser or tenant of the property more wary.
It is important to note though that a tenancy of sub-standard domestic PR property will still be valid and enforceable even if the MEES Regulations have not been complied with.
Are there any exceptions?
There are some types of property, tenancy and landlord to which the MEES Regulations do not apply at all.
If the MEES Regulations do apply, the prohibitions on letting or continuing to let sub-standard property are not absolute. The MEES Regulations set out legitimate reasons which permit landlords to let sub-standard property, on or after the relevant date. In broad terms, the legitimate reasons are that either:
A) all the relevant energy efficiency improvements for the property have been made (or there are none that can be made) and the property remains sub-standard. Prior to 1 April 2019, an energy efficiency improvement only qualified as a relevant energy efficiency improvement where the cost was capable of being wholly funded at “no cost to the landlord”. This requirement no longer applies on or after 1 April 2019 and a capped landlord contribution of £3,500 including VAT has been introduced;
(b) an exemption in Chapter 4 of Part 3 of the MEES Regulations applies.
In each case, the landlord must enter the relevant details on the PRS Exemptions Register to avoid enforcement action.
This is all very complicated and raises more questions than it answers. Is there any official guidance?
Yes. However, in certain cases the guidance and the MEES Regulations appear to contradict one another so, if there is any doubt it will always be best to seek expert legal advice.
The Government has issued guidance on domestic PR Property and the MEES. The guidance was first issued in October 2017 but has been regularly updated.
The Government has also issued separate guidance on the PRS Exemptions. The guidance was first issued in March 2018 but, again, has been subject to various updates since then.
In summary, part 3 of the MEES Regulations is very complex and there are many nuances to each provision. This article is only intended to give a general overview of the key points and is not intended serve as a replacement for seeking expert legal advice on a particular scenario. As such, if you have any queries arising from this article or generally regarding the MEES Regulations, please contact the property team at Bennett Griffin LLP for further advice.
The content of this article does not constitute legal advice and should not be relied on as such advice. The author and Bennett Griffin LLP accept no responsibility for any reliance placed on the content nor the continuing accuracy of the content.