Gemma Smith and Amber Pocock, in our Commercial Property team look at the Minimum Energy Efficiency Standards Regulations (MEES) and the changes, penalties and exemptions that may apply.
An Energy Performance Certificate (EPC) shows how energy-efficient a property is by giving it a rating from A to G (A being the most efficient and G being the least efficient). The Minimum Energy Efficiency Standards Regulations (MEES) are intended to improve energy efficiency for both residential and commercial private rented property.
In 2018 the minimum EPC rating for all domestic and commercial properties when granting new leases was set at an ‘E’. This rating requirement was then made applicable to existing domestic tenancies from 1 April 2020. In the final implementation of these regulations, the minimum EPC rating requirement of an ‘E’ will also apply to existing commercial leases from 1 April 2023. The impact of a breach of MEES will not affect the validity of the lease, but landlords should not accept rent from tenants of sub-standard properties unless an exemption has been registered.
Enforcement and Penalties for Sub-Standard Commercial Properties
For breaches of MEES that last less than 3 months, a landlord renting out a sub-standard commercial property may receive a fine of £5,000, or 10% of the property’s rateable value, up to a maximum of £50,000.
A breach of MEES regulations lasting longer than 3 months can trigger a fine of the higher of £10,000 or 20% of the rateable value of the property, up to £150,000.
Exemptions for Commercial Properties
To have a valid exemption, a property must be filed with the Private Rented Sector Exemption Register. Where an exemption is applied for and approved, most will currently last for a period of 5 years. Below are some of the available exemptions and of what is required for filing for one.
The property is below an ‘E’ and there are no relevant improvements which can be made. This allows for a cost-effectiveness test using a 7-year payback rule and only those meeting the test would be considered ‘relevant’ (all relevant improvements must still be made).
- A recommendation report that shows that no improvements can be made. The type of report required could be an EPC report, a report by a surveyor or a Green Deal Report.
All relevant (as above) improvements have been made but the property remains below an ‘E’ rating.
- Details of energy efficiency improvements recommended for the property in recommendation report, report by chartered surveyor or Green Deal report will be required.
- Details of how all measures have been tried to bring the property into compliance with the regulations must be provided.
Consent Exemption.
- Provide a copy of correspondence showing the consent for energy efficiency measure was required and sought and this consent was refused.
Devaluation Exemption – Installation of a specific energy efficiency measure will devalue the property by 5% or more (all other relevant improvements will still need to be made).
- A copy of a report prepared by an independent RICS surveyor that provides evidence the installation of a measure would devalue the property by more than 5% must be provided to qualify for this exemption.
You have recently become a landlord under circumstances that qualify the property for exemption.
This exemption is temporary and will only last for 6 months from the date of purchase.
- Provide the date at which you became the landlord
- Provide an explanation of what qualifying circumstances apply
As the exemptions are only temporary with no guarantee that a further application for an exemption will be granted, it is advisable in the first instance for landlords to invest in trying to bring a property up to required standard before applying for an exemption, this is also a pre-requisite to many of the exemptions. Doing so should put landlords in a better position for the future as the minimum EPC rating requirements are expected to increase for the purpose of the MEES Regulations.
If you require assistance, please do not hesitate to contact our Commercial Property team but please note that we are not able to assist with registering an exemption.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
