By the end of March, residential landlords need to act if the EPC rating of their properties is below E in accordance with the requirements of the Minimum Energy Efficiency Scheme (MEES).
Since 1 April 2018 landlords have not been permitted to grant a lease of commercial or residential property with an EPC rating below E without carrying out works to improve the EPC rating to at least E, unless one of the permitted exemptions applies or the letting is outside the scope of MEES.
However, for landlords of residential property the requirements become more onerous from 1 April 2020. From that date, MEES will apply not just to new lettings but also to landlords who continue to let a property, whenever the lease was granted.
The MEES scheme applies to all residential tenancies that are assured tenancies - including assured shorthold tenancies - and regulated tenancies. The scheme does not apply to social landlords.
For landlords of properties with an EPC rating below E (which the regulations call sub-standard), the obligation is to carry out enough of the works listed in the EPC’s recommendation report to improve the energy rating to at least E. However, in the case of residential properties, landlords are not required to spend more than £3,500 per property (inclusive of VAT). If the EPC rating cannot be improved to E after spending £3,500, then the landlord is entitled to register an exemption.
Penalties for breach can be as high as £5,000 for each property. Although local authorities do not seem to be enforcing the regulations currently, landlords should not assume that this will continue to be the case.
The MEES regulations contain a number of exemptions. To be effective, they must be registered on the online exemptions register. Landlords need to be aware that parts of it are open to inspection by the public, including information about the identity of the property.
Until 1 April 2019, it was possible to register an exemption on the basis that it was not possible to obtain no cost financing. However, any exemptions registered on that basis will cease to apply on 1 April 2020 and landlords will be subject to the new requirements.
The remaining exemptions likely to be relevant to residential landlords are:
- The landlord has spent the maximum outlay of £3,500 (including VAT) on energy efficiency improvements but the EPC rating remains below E
- There are no energy efficiency improvements that can be carried out that cost less than £3,500 (including VAT).
- Some form of consent eg planning consent is needed but cannot be obtained
Exemptions last for five years but can be renewed if still justified. There is no fee for registering an exemption, but in some cases assembling the evidence that needs to accompany the application may be difficult and time-consuming. For example, in certain cases it is necessary to lodge estimates from three contractors, which could be difficult to obtain in practice.
It is clear that bringing properties up to an EPC rating of E is only the start. As part of its Green Growth Strategy, the Government announced in October 2017 that it was intending to develop a long-term trajectory to improve the energy performance standards of privately rented homes, with the aim of upgrading as many as possible to EPC Band C by 2030 where practical, cost-effective and affordable. This is now only ten years away. A consultation on the detail is expected this spring.