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A Landlord, Investor and Developer’s Straightforward Guide to MEES and EPC Ratings

If you are a landlord, developer or freehold investor, then you need to read this brief guide.

The Minimum Energy Efficiency Standard (MEES) requires commercial and residential properties to have a minimum Energy Performance rating (EPC) of an “E”. This legal requirement is being phased in with the below key dates:

  • From April 2018, MEES will apply to all new lets and tenancy renewals.
  • From 1st April 2020, it will apply to all residential tenancies required to have an EPC rating.
  • From 1st April 2023, it will apply to all existing commercial leases that are required to have an EPC rating.

From these dates, it will be unlawful to rent a property which has an Energy Performance Rating of an “F” or “G’”. The penalty for renting out a property in breach of this Regulation is dependent on the rateable value of the property. The minimum penalty is £5,000 and the maximum is £150,000.

However, there are numerous exceptions and exemptions and there may be some good news for landlords who have properties with solid walls (properties typically built before 1918).

If you are a landlord, freehold investor or developer who needs to find out more about MEES, including if you are excluded or exempt, please contact our Commercial Property team.

  • What is the Minimum Energy Efficiency Standard (MEES)?
  • What are EPC Ratings?
  • What is in Scope for MEES?
  • What Buildings are Excluded?
  • What are the MEES Exemptions?
  • What Improvements are Required?
  • What are the Penalties for non-compliance with MEES?
  • What is the Impact on Freehold Investors and Developers?
  • Why Else?
What is the Minimum Energy Efficiency Standard (MEES)?

The minimum energy efficiency standard (MEES) was introduced in March 2015 by the Energy Efficiency Regulations. From 1 April 2018, landlords of buildings within the scope of the MEES Regulations must not renew existing tenancies or grant new tenancies if the building has less than the minimum energy performance certificate (EPC) rating of “E”, unless the landlord registers an exemption.

After 1st April 2020, all residential landlords must not continue to let any houses or flats with less than an “E” EPC rating unless the landlord registers an exemption.

After 1 April 2023, all commercial landlords must not continue to let any buildings which have an EPC rating of less than “E” unless the landlord registers an exemption.

What are EPC Ratings?

Energy Performance Certificates (EPCs) are needed whenever a property is:

  • Built
  • Sold or
  • Rented

You must order an EPC for potential buyers and tenants before you market your property to sell or rent.

An EPC is completed by an accredited assessor and contains:

  • Information about a property’s energy use and typical energy costs
  • Recommendations about how to reduce energy use and save money

An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for 10 years.

What is in Scope for the MEES?

The MEES applies to residential (houses and flats) and commercial properties in England and Wales.

In the case of flats, this means a self-contained unit. Non-self-contained units, such as bedsits, do not require an individual EPC. If there is no EPC for the building they are in, then they do not need to comply with MEES. However, when the house they are in is sold, it must be given an EPC and the bedsits will then need to comply.

What Buildings are Excluded?

There are numerous buildings which are not required to have an EPC and so are excluded from MEES including:

  • Tenancies of over 99 years
  • Industrial sites and workshops
  • Buildings where the EPC is over 10 years old or where there is no EPC
  • Listed buildings– the extent of their inclusion is unclear and we advise you to contact us with any questions on these.
  • Residential buildings which are intended to be used less than 4 months of the year.
  • Temporary buildings with a planned timed use of 2 years or less.
  • Stand-alone buildings with a total usable floor area of less than 50 square meters.
  • Holiday lets

This is not as straightforward as it seems and we suggest you contact us if you have any questions.

If your building is not excluded, then any property with an EPC rating of an F or G is substandard for letting. If you continue to let such a property then you are liable for a penalty of between £5,000 and £150,000. However, this breach does not affect the validity or legality of the tenancy, so the rent continues to be payable.

However, there are some exemptions to the MEES.

What are the MEES Exemptions?

There are three possible MEES exemptions:

  1. The Green Deal Golden Rule– Under the Golden Rule, there should be no upfront costs (or any net cost to you) in making the required energy efficiency improvements. The savings your improvements generate should repay their cost over their expected lifetime. If the predicted savings are less than the expected costs, then you have a possible exemption.
  2. Devaluation– this is where an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%.
  3. Third Party Consent– this applies where consent from persons such as a tenant, a superior landlord or planning authorities has been refused or has been given with conditions with which the landlord cannot reasonably comply.

We highly recommend that you speak to us to see if you are exempt from MEES. If so, then you need to notify the Government operated PRS Exemptions Register. This opens on 1st October 2017.

Else Solicitors can help you with this registration. It is important, as if you do not register, then your exemption will be ineffective and amount to non-compliance with the regulations.

We recommend that you contact our Commercial Property team to find out if you are excluded or exempt from MEES.

What Improvements are Required?

If you are not exempt or excluded then you must bring your properties up to a minimum “E” rating. It is up to you to decide what improvements to make under the Golden Rule. These changes could include:

  • Cavity wall insulation
  • Solid wall insulation (internal or external)
  • Loft or rafter insulation (including loft hatch insulation)
  • Draught proofing
  • Thermostat boilers and room heaters
  • Duct insulation
  • Hot water showers/systems or taps (efficient)
  • Heating controls (for wet central heating systems and warm air systems)
  • High performance external doors
  • Lighting systems fittings and controls (including roof lights and lamps)
  • Pipework insulation
  • Replacement or secondary glazing

Recent research has identified that EPCs understate the thermal efficiency of solid walls. The Government is proposing to recalibrate EPCs to give a truer reading. This could mean that some solid wall properties currently rated F under an EPC will no longer require any work and less work may be required in the case of a G rated property. This recalibration has yet to happen and with the upcoming General Election it is unlikely to do so anytime soon. We can advise you on what to do in the meantime.

Else Solicitors will help you to understand MEES, if work needs to be done and what you can do if the necessary improvements cost you more than the resulting savings (i.e. they do not fit under the Green Deal Golden Rule).

What are the Penalties for Non-Compliance with MEES?

The MEES Regulations will be enforced by the Local Weights and Measures Authorities who can impose civil penalties for non-compliance.

The penalties are two-tiered. The penalty depends on how long the property had been rented in breach of the regulations:

  1. Less than 3 months– In this case, the penalty is 10% of the property’s rateable value. The minimum penalty is £5,000 and the maximum £50,000.
  2. More than 3 months– In this instance, the penalty is 20% of the property’s rateable value. The minimum penalty is £10,000 and the maximum £150,000.
What is the Impact on Freehold Investors and Developers?

Properties that do not meet the minimum standard and are not excluded or exempt from MEES may be reduced in value when it comes into force.

  • Freeholder investors should audit their portfolio of properties to assess the impact of these Regulations.
  • Developers should do likewise. However, there is an opportunity for them to acquire properties that do not meet the minimum standard at a reduced cost.

We can help you to understand the impact of MEES on your property portfolio and what actions you should take.

Why Else?

Else is a modern, dynamic and forward thinking firm of solicitors who have the expertise you expect from a large, traditional law firm.

You will discover that we are different to other legal firms. We will help you sort out your situation and then look at other ways that we can add value to your company. This could include introducing you to new customers or suppliers in our extensive network or offering you some new insight into your market or your business.

Else Solicitors has an enviable reputation for always going the extra mile and offering a personal, jargon free service. Your business is not only in trusted legal hands but will also benefit from our extensive business knowledge, experience and contacts.

If you are a landlord, developer or freehold investor, then we urge you to call our Commercial Property team on 01283 526 200.

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