The Energy Act 2011 placed a duty on the Secretary of State to bring into force by April 2018 regulations (“MEES” Regulations) to improve the energy efficiency of buildings in the domestic and non-domestic private rented sector in England and Wales. These regulations are applicable to non-domestic and domestic buildings.
The effect of the MEES Regulations is as follows:
· The MEES Regulations, subject to exceptions, make it unlawful for a Landlord to let buildings that do not comply with the minimum required energy efficiency standard, which the Regulation set at an “E” rating on a valid EPC.
· The Regulations result in it being unlawful to let non-compliant buildings after April 2018 and continue to let non-compliant buildings after April 2023 (or April 2020 for residential properties).
· Leases are not invalid, however, the Landlord who is in breach of the Regulations is liable to a civil penalty. Financial penalties can be imposed for an amount not exceeding £5,000 in relation to domestic property and not exceeding £150,000 for non-domestic properties.
· Building that are not required to have an EPC under the Energy Performance of Buildings (England and Wales) Regulations 2012 are not subject to the restrictions on lettings imposed by these Regulations.
The following exemptions are available:
- Regulation 29 apply where a Landlord of a sub-standard non-domestic property has made all the “relevant energy efficiency improvements” to the property, or where there are “no relevant energy efficient improvements” that can be made to the property and still the minimum required energy efficiency standard cannot be reached. The exemption applies for five years from the date of registration.
- Regulation 31 – if, despite reasonable efforts, the Landlord has not been able to obtain consent of the Tenant, a Superior Landlord or Mortgagee or to obtain planning or listed building consent to the making of the relevant improvements within the last five years.
- Regulation 32 – if, in the last five years, the Landlord has been unable to increase the energy performance indicator for the building because he has obtained a report prepared by an independent surveyor which states that the making of that relevant energy efficiency improvement would result in a reduction of more than 5% in the market value of the property, or of the building of which it forms part.
- Regulation 33 – in cases where a tenancy is granted in exceptional circumstances, for example, deed surrender and regrant, exercise of an option to remove, granting of a replacement lease to a tenant’s guarantor. The Landlord will have six months from the date of which it becomes the Landlord to comply with the Regulations.
For an exemption to be available, the Landlord must have registered the exemption on a centralised register – The Private Registers Exemption Register (“PRS”). The exemptions are personal. If the building is sold, a new Landlord must register its own exemption.
How Jolliffes can help:
There are several practical issues to consider ranging from whether a Landlord needs to register an exemption; is there a valid EPC in place; is one required if the current EPC has expired? It is the Tenant’s obligation under its Lease to comply with the MEES Regulations and can a Landlord recover the costs of improving the energy rating under the lease? Is there any advantage to be had in any dilapidations negotiations?
If you require any help or guidance in relation to this or any commercial property transactions, please contact commercialproperty@jolliffes.com call us on 01244 310022.
By Clare Player.
