Landlords need to be aware of environmental legislation requirements before letting their properties.
This is called the Minimum Energy Efficiency Standard (MEES) Regulation. The main aim behind this is to prevent Landlords from renting out residential and commercial property that fall below the specified energy rating of ‘E’ set out in the Energy Performance Certificate (EPC).
The legislation is slightly different for residential property. This article will focus on commercial property lettings.
The MEES Regulation is being phased in over a number of years.. There are two key dates:.
- Since 1st April 2018, Landlords who own properties where the EPC rating is below “E” must carry out specific energy efficiency improvements before granting a new lease to a Tenant.
- From April 2023, MEES will apply to leases already in force which in effect, will apply to most commercial property leases. These are known as ‘sub-standard properties’ and they must be rated as “E” or above in the EPC.
The legislation does state various exemptions which will allow a Landlord to let, or continue to let ‘sub-standard properties’ and the main exemptions are:
- Seven year payback test: The Landlord will only be required to carry out efficiency measures that have an expected payback of seven years or less.
- If the efficiency methods decrease the value of the property by 5% or more;
The MEES legislation does not impose any criminal sanctions. However, the Local Weights and Measures Authorities will enforce the legislation and can implement civil penalties. These penalties are as follows:
- If the breach is less than three months: a fine equivalent to 10% of the rateable value of the property, subject to a minimum penalty of £5,000 and maximum of £50,000.
- If the breach exceeds three months: a financial penalty equivalent to 20% of the rateable value of the property, subject to a minimum penalty of £10,000 and maximum of £150,000.
What you need to do
By 2023, leases already in force will come under the MEES legislation. Landlords should therefore consider reviewing their portfolio to check that their properties are compliant with the legislation and, if necessary, make contingency plans for properties which will have to be improved to meet the minimum threshold of an “E” rating.
For further information, please contact Joseph McCullough or Duncan Morter in our Commercial Property Team on 01904 624185.