The time is almost upon us; as of April 1st, all residential and commercial rental properties must conform to the new Energy Efficiency Standards. The regulations impact both residential and commercial landlords, so we’ve put together a guide to help you make sure you’re compliant. Here’s what you need to know.
What are the Minimum Energy Efficiency Standards?
In 2015, the Minimum Energy Efficiency Standards were introduced as part of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.
From 1 April 2018, landlords must not renew any existing tenancies or commit to any new ones for properties that don’t have a minimum of an E on their Energy Performance Certificate (EPC) if a) the building falls within the scope of the MEES and b) an exemption hasn’t been registered.
From 1 April 2020, landlords must not continue to let residential properties that don’t meet an E on their EPC. For commercial properties, it’s 1 April 2023.
What buildings and tenancies do the Minimum Energy Efficiency Standards apply to?
The MEES apply to the vast majority of properties, but there are certain buildings and tenancies that are exempt. These are:
- Buildings which are not required to have an EPC, such as industrial sites, workshops, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties and holidays lets
- Buildings where the EPC is over 10 years old or where there is no EPC
- Tenancies of less than six months (with no right of renewal)
- Tenancies of over 99 years
Are there any exemptions?
Assuming your property doesn’t fall under the above exclusions, there are ways it may be exempt from the MEES. They are:
- If you have carried out all cost-effective energy efficiency improvements, either within a seven-year payback or under the Green Deal’s “Golden Rule”, and it still doesn’t meet the standards
- If a third party has refused to let you make the improvement work, such as a local authority or the sitting tenant.
- If the improvements would damage the property or devalue it by five per cent or more
Exemptions last for five years and you will need to email PRSregisteraccess@beis.gov.uk in order to lodge them.
What are the penalties for non-compliance?
There are a number of financial penalties that could be leveled against you for not complying with the MEES, depending on whether your property is residential or commercial, and how long you’ve been in breach for.
Penalties for residential properties
For residential properties, if you have been letting out a non-compliant property for less than three months, the penalty is up to £2,000, and if it’s been more than three months then the penalty goes up to a maximum of £4,000.
There are two other maximum penalties of £2,000 – one for providing false or misleading information to the PRS exemption register, and one for failing to comply with a compliance notice.
It’s important to note that these penalties are per property and per breach, so if you have a portfolio of properties, the fines could end up significantly higher.
Penalties for commercial properties
The fines for non-compliant commercial properties are significantly higher than for residential properties. If you’ve been letting out a non-compliant commercial property for less than three months, the penalty is up to either £5,000, or 10 per cent of the rateable value of the property, whichever is higher, and with a maximum penalty of £50,000.
If you’ve been letting out a non-compliant property for more than three months, the penalty is up to £10,000 or 20 per cent of the rateable value of the property, whichever is higher, and with maximum penalty of £150,000.
As with residential properties, there is a penalty for providing false or misleading information to the PRS exemption register, or failing to comply with a compliance notice, and for commercial properties it’s up to £5000.
How do I ensure my property is compliant?
An important first step is knowing your property’s EPC rating. Once you know if it falls below band E, you can start working out how to bring it up to standard. You can find out your EPC rating by having an energy assessment carried out, which will make recommendations on how to improve the property.
Check out gov.uk for information on how to get an energy assessment.
It’s important to note that if your property’s current energy assessment was carried out more than 10 years ago, it may not be accurate, as the criteria for the bands has since changed.
Once you have your assessment, you’ll know your property’s EPC rating, and there will be recommendations for how to improve it. If your property falls into a band E or higher, you’re not obliged to follow through with the recommendations, though improving the energy efficiency of your property can make it more appealing to tenants, and may save you money down the line.
Whether you’re a current landlord of ours or not, and are unsure as to any of the affects the new standards will have on your properties, please give us a call on 0161 883 2525 and we’ll be more than happy to talk about it.