New Legislation from 1 April 2018 will make it unlawful to let buildings (both commercial and domestic) in England and Wales which do not achieve a minimum Energy Performance Certificate (EPC) rating of ‘E’, therefore any existing stock with an EPC rating of ‘F’ or ‘G’ will be unlettable post 1 April 2018.
L2 Energy have significant experience in advising on the most cost effective ways to improve poor performing building stock, whether within our clients’ portfolios or on owner occupied property where a sale or lease is proposed at some point in the future.
MEES - The Finer Detail
MEES requires properties to be brought up to a minimum EPC rating of ‘E’, while properties with an EPC rating of ‘F’ or ‘G’ being termed ‘sub-standard’ in the regulations.
MEES will apply where the grant of a new lease (including lease renewals) is made on or after 1 April 2018, therefore Landlords need to put plans in place as soon as possible to avoid potential void periods following its introduction.
On 1 April 2023 MEES will be extended further to cover all leases, including existing leases where the property has a valid EPC.
MEES will only apply to buildings that require an EPC under current regulations and will therefore exclude listed buildings. MEES will also not apply to very short lettings, or to lettings of 99 years or more.
Interestingly, landlords will be exempt from meeting the minimum ‘E’ rating, for five years, where they have implemented all cost-effective improvement measures, roughly speaking this accounts to works that offer a payback period within 7 years, but still achieve an ‘F or ‘G’ rating. This five-year exemption period is also extended where a third party refuses the work to be undertaken i.e. a tenant or if the implementation of such improvement measures would result in a devaluation of the property by 5% or more.
Where a non-compliant ‘F’ or ‘G’ property occupied by a tenant is sold or transferred, the incoming landlord will have just six months to upgrade the property or demonstrate that a valid exemption applies.
The Government will create a register for owners to lodge evidence to demonstrate exemption from MEES.
The penalty for non-compliance will largely be based on the rateable value of the property, up to a maximum fine of £150,000.
The Government is expected to review the performance of MEES in 2020 and adjust the legislation if necessary.