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The Ultimate Guide to Minimum Energy Efficiency Standards (MEES)

Overview

As from the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to normally have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. A civil penalty of up to £4,000 will be imposed for breaches. This guidance summarises the regulations.

Scope

The Regulations apply to domestic private rented sector properties in England and Wales. This means –
Properties let under an assured tenancy or a shorthold.
A tenancy which is a regulated tenancy for the purposes of the Rent Acts.

Properties let
(a) On a tenancy which is an assured agricultural occupancy
(b) On a protected tenancy under the Rent Act 1976
(c) On a statutory tenancy under that Act.

Need for an EPC
Properties within scope will include any domestic privately rented property which: has an EPC, and is either (i) required to have an EPC; or (ii) is within a larger unit which itself is required to have an EPC, either at point of sale, or point of let. No changes are made to existing regulations regarding the provision of EPCs.

Flats and houses are subject to the regulations. In the case of flats this means self-contained unit. Non self-contained units such as bedsits do not require an individual EPC.

If a property does not have an EPC then the regulations do not apply.

The EPC must be the current EPC if there is one and this must be no more than 10 years old.

Current MEES Legislation:-

The Regulations were subsequently amended in June 2016 to postpone the dates on which the PRS Exemptions Register will open to domestic and non-domestic landlords. The amending of regulations are available here…

The Energy_Efficiency_Private_Rented_Property_Amendment_1_Regulations_2016_No.660_Legislation_Gov_UK

Latest MEES Guide from the UK Government:-

The Government published its MEES Guidance for Landlords (PDF) on 23 February 2017. The Guidance for Landlords is designed to help landlords, freehold investors, lenders and enforcement authorities to prepare for the MEES Regulations.

Non_Dom_Private_Rented_Property_Minimum_Standard_Landlord_BIES_Guidance_Feb_2017

 

– MEES Domestic Properties

MEES properties within scope
Properties within scope will include any domestic privately rented property which: has an EPC, and is either (i) required to have an EPC; or (ii) is within a larger unit which itself is required to have an EPC, either at point of sale, or point of let. No changes are made to existing regulations regarding the provision of EPCs.

Flats and bedsits
Flats and houses are subject to the regulations. In the case of flats this means self-contained unit. Non self-contained units such as bedsits do not require an individual EPC.

If a bedsit is within a property that does have an EPC, then the Regulations will need to be complied with before the bedsit can be rented out. Although as such bedsits do not need an EPC if the house containing the bedsit has been sold for example it will have an EPC in which case the Regulations will apply.

MEES buildings excluded from scope of requirements

The following domestic buildings are excluded from the scope of the requirements:
Buildings and monuments officially protected as part of a designated environment or because of their special architectural historical merit insofar as requirements with certain energy efficiency requirements would unacceptably alter their character or appearance.

This includes listed buildings.

Temporary buildings with a planned timed use of 2 years or less.
Residential buildings which are intended to be used less than 4 months of the year.
Stand alone buildings with a total usable floor area of less than 50 square meters.

MEES with listed buildings etc

The extent of the exclusion of listed buildings from the scope of the requirements is unclear. Likewise, in the case of dwellings located within conservation areas. The Regulations state that this exemption is “insofar as compliance with certain minimum energy efficiency requirements which would unacceptably alter their character or appearance”. This exemption is based on a similarly worded exemption from the need to obtain an EPC. Clearly, if a listed building or dwelling within a conservation area does not have an EPC then the Regulations do not apply because only the existence of an EPC triggers the need to comply with the minimum standards. There is a widely held view that all listed buildings are exempt from the need to obtain an EPC, even if they are sold or let out, but, again, the exact scope of this exemption is not clear.

MEES improvements which can be required

Improvement work which can be required is any energy efficiency improvement work which qualified for Green Deal and the installation of gas for an off gas property so long as the mains are within 23 metres from the property. A list of eligible improvements appears below.

So long as the minimum E rating is obtained, it is left to the landlord to choose which works need to be carried out. Obviously there is nothing to stop a higher rating being achieved.

MEES prohibition on letting

A domestic private rented sector property is substandard if the EPC rating is F or G, unless an exemption applies. The legislation prohibits a landlord from letting out a substandard property. If there is an EPC in place which shows that the property is an F or G then it must not be let; otherwise the landlord is liable to penalties. This is subject to any available exemptions. Energy efficiency improvements must be carried out to bring the property up to an E rating at the minimum, unless one of the exemptions is applicable. In particular, if the work cannot be carried out so as to meet the Green Deal Golden Rule then there is potentially an exemption. Under the Golden Rule there should be no upfront costs (or any net cost to the landlord) because savings resulting from the works should repay their cost over the expected lifetime of the works.

If a landlord lets and continues to let the property in breach of the regulations, however, the breach does not affect the validity or legality of the tenancy itself, so the rent still continues to be payable.

Exemptions, restrictions on making improvements
Only appropriate, permissible and cost-effective improvements are required under the regulations. Landlords will be eligible for an exemption from reaching the minimum standard where they can provide evidence that one of the following applies:

They have undertaken those improvements that are cost-effective but remain below an E EPC rating. Cost-effective measures are those improvements that are capable of being installed within the Green Deal’s Golden Rule. This ensures that landlords will not face upfront or net costs for the improvement works.

They are unable to install those improvements that are cost-effective without upfront costs because the funding entails Green Deal Finance, and they or their tenant fail the relevant credit checks.

The landlord is required by a contractual or legislative obligation to obtain a third party’s consent or permission to undertake relevant improvements relating to the minimum standard, and such consent was denied, or was provided with unreasonable conditions.

The landlord requires consent, and the occupying tenant withholds that consent.

Measures required to improve the property are evidenced by a suitably qualified independent surveyor, for example from the Royal Institution of Chartered Surveyors (RICS), as expected to cause a capital devaluation of the property of more than 5%. Only those measures that are expected to cause such devaluation would be exempt from installation.
There will be no requirement to install wall insulation under the regulations where the landlord has obtained a written opinion, from a suitably qualified person or from the independent installer engaged to install the measure, advising that it is not an appropriate improvement due to its potential negative impact on the fabric or structure of the property (or the building of which it is part).

 MEES registration of exemptions

All exemptions will be required to be notified to the PRS Exemptions Register which will be operated by the Government. It is planned that this will open from 1st October 2017. It will be essentially a database of exemptions and will be open to public inspection. Failure to register any exemption will render the exemption ineffective, and will amount to non-compliance with the regulations. The Enforcement Authority will be entitled to require landlords to furnish them with evidence supporting a claim for an exemption. Landlords will also be in breach of the regulations if they claim an exemption to which they are not properly entitled.

 MEES duration of exemption

Exemptions will only endure for 5 years. They will then need to be reviewed to see if they are still effective. If not the work will have to be carried out.

Implementation
From 1 April 2018, the regulations will apply on the granting of:

A new tenancy to a new tenant
A new tenancy to an existing tenant, i.e. any extension or renewal to an existing tenant. This includes a statutory periodic tenancy which comes into existence at the end of the fixed term shorthold.

From 1 April 2020, the regulations will apply to all privately rented property in scope of the regulations.

Where a lease is granted involuntarily by a landlord, for instance due to operation of law, they may be provided with six months to comply after the tenancy is agreed. Similarly, where a non-compliant property occupied by a tenant is sold, or is transferred to a lender in the event of landlord’s default (e.g. if a receiver is appointed), the new landlord will have six months to improve the property, or seek to demonstrate an exemption applies.

Note: the Regulations actually come into force on 1st October 2016. This is purely for the purpose of allowing landlords to claim exemptions early so that they had their exemption claim in place prior to implementation on 1st April 2018.

MEES Enforcement

Local authorities will enforce compliance with the regulations.
Where a landlord considers an exemption applies allowing them to let their property below the minimum energy efficiency standard, the landlord will need to provide such evidence to a centralised register, the “PRS Exemptions Register”. Landlords may be required to submit relevant evidence and details of their exemption to the Register. The Government may use this information to assist local authorities in targeting their enforcement activity.

MEES Compliance Notices and Penalties

Where a local authority suspects that a landlord with a property in scope of the regulations is not compliant, or has not sufficiently proved an exemption, the local authority can serve a compliance notice on the landlord requesting further information it considers necessary to confirm compliance. If it is not provided, or is provided and is not sufficient to provide compliance, the local authority may proceed to issuing a penalty notice.

· Penalties for a single offence may be cumulative, up to a maximum of £5,000. Further penalties may be awarded for non-compliance with the original penalty notice where a landlord continues to rent out a non-compliant property; however, penalties would be cumulative up to a maximum of £5,000.

The landlord can be awarded a further penalty when one of the following events occurs:

The tenant changes
The regulatory backstop comes into effect

The penalty regime for non compliance with the regulations will be as follows:

Penalty
Providing false or misleading information to the PRS Exemptions Register
£1,000 Publication of non compliance
Failure to comply with a compliance notice from a local authority
£2,000 Publication of non compliance
Renting out a non-compliant property
Less than 3 months non compliance
£2,000 fixed penalty
Publication of non-compliance
3 months or more of non compliance
£4,000 fixed penalty
Publication of non-compliance

NB: The penalty amounts are fixed and do not vary according to the severity of the contravention.

MEES Reviews
Upon receiving a penalty notice from a local authority, a landlord may request a review of the local authority’s decision to serve the notice. If a landlord requests a review, the local authority must consider any representations made by the landlord and all other circumstances of the case, decide on whether to confirm the penalty charge notice, and give notice of their decision to the landlord. If the local authority is not satisfied that the landlord committed the breach specified in the notice, or given the circumstances of the case it was not appropriate for a penalty charge notice to be served, they must withdraw the penalty notice. If the local authority is still satisfied that the landlord committed the breach, but the landlord still believes the penalty notice is incorrect, the landlord may proceed to the appeals process.

 MEES Appeals
Landlords may appeal any penalty notice on the basis that the penalty notice was issued in error (error of law or fact), the penalty does not comply with the Regulations, or that it was inappropriate in the circumstances for the penalty notice to have been served. The appeal would be heard at the First Tier Tribunal (General Regulatory Chamber).
Improvements which can be required

– MEES Non-Domestic – Commercial Properties

Subject to exceptions a landlord of a non-domestic private rented property must not grant a new tenancy of the property after 1st April 2018 including sub lettings, and must not continue to let the property after 1st April 2023 (i.e. capturing lease renewals for properties without an EPC), where the Energy Performance Certificate (EPC) of the property is below band E.

Furthermore, the Government proposes to review MEEs in 2020 which will most likely see the standards tighten. In our opinion the minimum ‘E’ ratings will not be changed to a ‘D’ or above since EPCs are continuously being degraded as and when building regulations, software updates and calculation methodologies are updated so that the same unchanged property can easily drop a band or two with each Building Regulation update (approximately every 4 years). Commissioning an EPC sooner rather than later will naturally help with a better rating.

 Penalty notices
An enforcement authority can (on or after 1st April 2018) serve a ‘penalty notice’ in any case where it is satisfied that there is or has been a breach in the regulations at any time in the 18 months preceding the date above. Where no action is taken, as required by a ‘penalty notice’ within the period specified, the enforcement authority may serve further penalty notices. A PRS Exemptions Register will be set up by the government for properties which are exempt including the reasons given for the exemption, landlord and property details. It should be noted, the Register will also contain the name of the landlord or company, details of the penalty notice and properties in breach.

Commercial penalties – financial penalty not exceeding (or whichever is greater than) £5,000 or 10% of the rateable value of the property and the register/publication penalty. This rises to £10,000 or 20% of rateable value, to a maximum of £50,000 if the matter is not resolved within three months. Rising to a maximum of £150,000 after the three-month period.
Other penalties also apply for false or misleading information or compliance issues for both Domestic and Commercial properties.

What ‘improvements’ can I make?
The recommendations can be found on the EPC itself for domestic properties and on a separate ‘Recommendation Report’ for commercial properties. Any ‘improvement’ must achieve a simple payback of seven years or less.

Whilst domestic EPCs show all the recommendations including the possible new rating (assuming no building regulation, software update, conventions etc. occur during pre and post EPC improvement), it is advisable to obtain a ‘draft’ EPC before the improvement work commences. A similar approach should be taken with commercial EPCs since these recommendations do not show what the new rating will be.

As far as MEEs legislation is concerned, the cost of ‘relevant energy efficiency improvement’ must achieve a simple payback of seven years or less:

Can be wholly financed, at no cost to the landlord (excluding survey fees), by means of funding provided by central government, a local authority or other bodies,
Can be wholly funded by the tenant making the tenant’s request, or
Can be wholly financed by a combination of the above

Unless the tenant/landlord is willing to pay for the measures, other routes to funding domestic improvements include the Green Deal Assessments. In simple terms the Green Deal offers a package of measures to improve the rating (most of which are part funded via ECO and Home Improvement Funds). These can be paid upfront or the cost (or balance after taking grants etc. into consideration) of the improvements can be added to the electricity meter as a ‘charge’ over a set number of years. Naturally the tenant will end up paying for this ‘charge’ unless the property is empty at which point the landlord is liable. Over tens of thousands of domestic properties have signed up to the Green Deal which means (in some cases) a ‘charge’ has been placed on the electricity bill.

Tenants and new property purchasers should specifically make a point of checking their EPC since details of any Green Deal ‘charge’ (total cost, years/months outstanding and interest) are recorded on every EPC. Our view is that most tenants and landlords will not approach the Green Deal to implement simple or cost effective improvements since adding a ‘package’ of measures will take months to organise and complete. However, if this is the preferred option, only Green Deal approved installers and assessors can carry out this work and only certified measures can be installed, hence increasing costs on ‘measures’ which might otherwise cost less to purchase and install independently (assuming you already have trusted installers).

There has not been any funding for commercial properties under the Green Deal. Unlike domestic Green Deal Assessments, commercial Green Deal Assessments incur greater costs since the assessment/survey is far more complex.

How to Maintain an EPC Rating?
Landlords need to not only protect themselves before a tenant is found but also to ensure that when tenants vacate the property the EPC rating has not changed for the worse. Obviously lease clauses and/or ‘green leases’ can be established to ensure tenants leave the property as they find it but this is not always possible. Adding clauses to leases such as ‘any changes must be made according to current Part L legislation’ would help, however any changes need to be recorded (copy of invoices, manuals etc) and be signed off by a building control officer. A substantial amount of poor EPC ratings are caused by lack of documentation. The alternative is to commission an EPC each time a lease is renewed, extended, expires etc. to check the rating hasn’t changed (e.g. simply changing or removing lighting in a commercial property will make a significant difference to the EPC rating) and include the extra cost either in contracts, memorandum of understanding etc. (including ‘costs’ for any remedial work if the EPC has changed due to tenant fit-out which may have a detrimental effect).

How should I proceed with the new MEES legislation?

MEES Commercial Exemptions
Most of the exemptions to obtaining an EPC rely on the European Performance Buildings Directive (EPBD) laws, UK legislation and Part L Building Regulations (BR). Some of these apply to places of worship, listed buildings etc. If you would like a full list please contact us. Other exemptions (outside of the above legislations) which apply to relevant ‘energy efficiency improvement’ or combination of relevant energy efficiency improvements, could result in a reduction of more than 5% in the market value of the domestic property, or of the building of which it forms part (e.g. internal wall insulation reducing the internal area of the property). A tenant refusing to give consent to Green Deal measures can also be used, although this does not apply for empty properties and will also be listed on the PRS Exemptions Register.

Apart from the above, commercial properties also have further exemptions:
On a tenancy granted for a term not exceeding six months, unless (i) the tenancy agreement contains provision for renewing the term or for extending it beyond six months from its beginning, or (ii) at the time when the tenancy is granted, the tenant has been in occupation for a continuous period which exceeds 12 months, or
On a tenancy granted for a term certain of 99 years or more.

Obtain in writing from an approved independent installer that the ‘improvement’ could cause a negative impact on the fabric or structure. Note: you will need a letter for each improvement measure from a qualified and accredited installer.

Does not apply to new landlords until six months after purchase.
This is not an exhaustive list and the full ‘statutory instrument’ is available below.

If you have any queries or would like to know more, please don’t hesitate to contact us.

MEES Improvements
This page is draft, currently being redrafted – under construction…

The following improvements are those which a landlord can carry out and which are eligible to qualify and comply with the Minimum Energy Efficiency Standards.
Air source heat pumps
Thermostat boilers
Thermostat room heaters
Cavity wall insulation
Solid wall insulation (internal or external)
Cylinder thermostats
Draught proofing
Duct insulation
Hot water showers/systems (efficient)
Hot water taps (efficient)
External wall insulation systems
Fan assisted replacement storage heaters
Flue gas recovery devices
Ground source heat pumps
Heating controls (for wet central heating systems and warm air systems)
Heating ventilation and air conditioning controls
High performance external doors
Hot water controls (including timers and temperature control)
Hot water cylinder insulation
Internal wall insulation (or external walls)
Lighting systems fittings and controls (including roof lights, lamps and luminaires)
Loft or rafter insulation (including loft hatch insulation)
Mechanical ventilation with heat recovery
Micro combined heating power
Micro wind generation
Pipework insulation
Photovoltaics
Chillers
Gas fired condensing boilers
Replacement glazing
Oil fired condensing boilers
Warm air units
Radian heating
Roof insulation
Warming roof insulation
Ceiling improvements (including duct ceiling)
Secondary glazing
Solar water heating
Solar blind, shutters and shading devices
Transpired solar collectors
Under floor heating
Under floor insulation
Variable speed driers for fans and pumps
Waste water heat recovery devices attached to showers
Water source heat pumps

Superseded useful documents:-

The Regulations were approved by Parliament and made on 26 March 2015. The original version No.1 of the Regulations is available below…

The_Energy_Efficiency_Private_Rented_Property_Regulations_2015_No.962_Legislation_Gov_UK

Low Carbon Energy Assessors (LCEA) Ltd (6682232) a limited company registered in England and Wales and regulated by The Royal Institution of Chartered Surveyors Regulation Authority.