Implications for landlords
MEES will have very significant implications for landlords:
If you are letting (or managing) a private residential or commercial property with an F or lower rating then you will need to take action to raise the energy efficiency before granting a new tenancy agreement or lease on or after 1 April 2018. In addition, as of 1 April 2023 you will be in breach of the MEES if you continue to let a property with an F or lower rating. Therefore longer term lettings that have been granted prior to 1 April 2018 will be caught.
Further, valuations of such properties could be adversely affected if the marketability of the property is an issue. Separately Rent Reviews could also be adversely affected as tenants could argue that the property cannot be let and therefore its value for the purposes of a Rent Review is nil. Furthermore, there could be significant implications for dilapidation assessments for similar reasons.
Commercial tenants could potentially find themselves facing large service charge demands for improvements works where properties do not meet the MEES.
Certain lettings will be exempt from the regulations and these include commercial property lettings for a term of 6 months or less or for a term of 99 years or more. Also residential property that falls within the following definition:
- An assured tenancy (including an assured shorthold tenancy) defined in the Housing Act 1988;
- A regulated tenancy defined in the Rent Act 1977;
- A domestic agricultural tenancy as set out in the Energy Efficiency (Domestic Private Rented Property) Order 201513 as follows:
- A tenancy which is an assured agricultural occupancy for the purposes of section 24 of the Housing Act 1988;
- A tenancy which is a protected occupancy for the purposes of section 3(6) of the Rent (Agriculture) Act 1976;
- A statutory tenancy for the purposes of section 4(6) of the Rent (Agriculture) Act 1976.
Landlords will need to register exempt properties on the PRS Exemptions Register, which will in part be open for public viewing. The register is open from 1 October 2017.
The regulations will cover Sub-lettings and Assignments.
If an EPC is required then MEES will apply, accordingly listed buildings or buildings in conservation areas aren’t automatically exempt although in accordance with Regulation 5(1)(a) there may be an exemption to the obligation to produce an EPC however 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 unacceptably alter their character or appearance”
What are the penalties for non-compliance?
The penalties for non-compliance are dependent upon whether the property is residential or commercial. The maximum possible penalties are as follows:
- Domestic – combined fines for breaches of up to £5,000 per property per letting e.g. if a landlord has already been fined for a letting in breach of the MEES rules and relets then the landlord can be fined up to £5,000 again for that property.
- Non-domestic – combined fines for breaches of up to £160,000 per property.
Given the potentially large fines, commercial landlords are particularly at risk if they do not comply with MEES. You can find the Government’s guidance notes for residential and commercial properties at the following link: https://www.gov.uk/government/publications/the-private-rented-property-minimum-standard-landlord-guidance-documents
Wellers has commercial property teams at each of our offices. Please contact us on 020 7481 2422 or complete our short enquiry form and we will get back to you.