_Residential landlords: Are you ready for the new Minimum Energy Efficiency Standards (MEES)?

What is the minimum energy efficiency standard (MEES) for a residential property?

From the 1st April 2018, there will be a requirement for any properties let in the private rented sector to have a minimum Energy Performance Certificate (EPC) rating of E.

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 minimum E rating, unless there is an applicable exemption. 

Landlords with substandard properties will have to carry out works to improve the EPC to a rating of E or above, or face penalties of up to £4,000. However, only appropriate, permissible and cost-effective improvements will be required under the regulations. 

MEES apply to all residential properties required to have an EPC and to all tenancies let under Assured Tenancies, Assured Shorthold tenancies and Rent Act tenancies. 

There are separate regulations effective from 1st April 2016 under which a tenant can apply for consent to carry out energy efficiency improvements in privately rented properties.

Why are these changes taking place?

The built environment has been identified by government as a major contributor to Greenhouse Gas (GHG) emissions and thus poses a threat to the UK meeting its 80% carbon reduction target by 2050. The Government hopes that the MEES regulations will help improve the energy efficiency of older buildings while working towards achieving the UK’s carbon reduction targets.

Landlords letting properties with an EPC rating of F or G may be liable to pay large fines from April 2018

What are the exemptions?

Landlords will be eligible for an exemption from reaching the minimum standard where they can provide evidence that one of the following applies:

•Where all possible cost-effective improvements were carried out but the EPC rating remains below an E rating. 'Cost effective improvements' are those that have been installed with a Green Deal.

•Where consents from a third party, such as a lender, freeholder or sitting tenant, for the improvement works were denied, or were provided with unreasonable conditions.

•Where carrying out the works would reduce the market value of the property by more than five per cent, as evidenced by a qualified independent surveyor. 

An exemption will last for up to five years and must be pre-registered on a central register for a landlord to rely on it.

What can you do now?

With the implementation of the minimum energy standards legislation less than six months away, time is short to minimise risk. In the first instance, we suggest that if you will be impacted by MEES you should contact us so we can help you to identify the potential risk to your assets.

Landlords with F or G rated properties should review the energy efficient improvements advised on their most recent EPC and then consider what works can be carried out before April 2018. Where work has recently been carried out to a previously low-rated property, the EPC should be renewed as the rating is likely to have improved.  

There is a high likelihood that the minimum energy standards proposed for 2018 will be raised in the future, so landlords should also consider whether it is worth doing more than the bare minimum and implement works to improve any buildings that also fall within ratings C and D.

How can Knight Frank help?

Knight Frank can provide a full compliance service, including:

• Advice upon the legislation and its implications for your assets.

• Assess current energy efficiency and energy performance risk across your portfolio and for individual assets.

• Produce a bespoke risk management plan (“Energy Efficiency Plan”) for your buildings to implement any necessary energy efficiency improvements, aligned with the building life cycle.

• The Energy Efficiency Plan will include fully costed investment grade proposals for achieving the minimum standards required.

• Negotiate with landlords/tenants regarding the completion of energy efficiency projects.

• Procure and manage any necessary improvement works.

• Provide energy performance reports and ratings for statutory compliance and for marketing purposes.