April Rules Day – New MEES regulations
1st April 2018 will see sweeping changes to the private rental sector landscape, with a significant expansion of the Minimum Energy Efficiency Standard (“MEES”) regulations. The Energy Performance Certificate (“EPC”), which was first introduced in 2007 under the short-lived Home Improvement Pack, is going to take on far greater significance.
The new rules are set out in a guidance document issued by the Department for Business, Energy & Industrial Strategy (“DBEIS”), which can be found here.
In short (and subject to certain exclusions):
From 01/04/2018: A new or a renewal tenancy may only lawfully be granted for a property that has an EPC rating of A – E.
Important Note: the provisions will apply to a statutory periodic tenancy arising after 01/04/2018 upon the expiry of a fixed term.
From 01/04/2020: The new rules will be further extended so that a property may only lawfully be let under an existing tenancy (i.e. within the initial fixed term, or running as a periodic tenancy) if it has an EPC rating of A – E.
These are the main exemptions:
- The regulations do not apply to a licence. However, if you do offer a person occupation of a property (or part of a property) for payment of rent you should seek legal advice as the relationship may be deemed to be a tenancy and subject to regulation;
- The MEES regulations only apply if your property actually requires an EPC (though most will, including some Houses in Multiple Occupation (“HMO”s));
- If all of the upgrade works have been undertaken but the property is still F or G rated;
- If funding cannot be obtained for the upgrade work required to bring the property above an F rating, and / or, the improvements required to improve the energy efficiency of the property are not cost effective1; and
- If the landlord is able to demonstrate that the improvements required to improve energy efficiency would reduce the value of the property by 5% or more.
- If a landlord qualifies for an exemption, they are required to register it on the Private Rented Sector (“PRS”) Exemptions Register. The exemption will last for five years, after which time the Landlord must have improved the energy efficiency rating to E or above, or obtained and registered a new exemption.
If a property has a low EPC rating and would ordinarily qualify for an exemption, improving the energy efficiency should always be the Landlord’s first choice. Registering an exemption should be the last resort for the Landlord as exemptions registered on the PRS Register automatically trigger a report to the local authority, which is likely to take action under the Housing Health and Safety Rating Systems (“HHSRS”) to force the landlord to remedy any cold hazard.
Having an exemption to MEES does not provide any exemption to the HHSRS. A failure to comply with the HHSRS will still result in an improvement notice being issued for a breach.
Any MEES exemption aside, non-compliance with that improvement notice will still carry the risk of substantial penalties; particularly for properties in England where penalties will be issued under the Housing & Planning Act 2016, and include substantial fines, Rent Repayment Orders or a banning order and being entered on a rogue landlord database.
Where a Local Authority suspects non-compliance with the MEES regulations, they will issue a Compliance Notice requiring the landlord to show that the property is rated E or above.
If the landlord is unable to do so, they face a fine of up to £4,000.00 as well as being “named and shamed” on the PRS Exemptions Register, which would trigger the above report to the local authority to further investigate whether there is a HHSRS hazard.
Landlords can request a review by the Local Authority, but if that fails, they have to apply to the First Tier Tribunal to obtain an exemption
Is my current EPC rating E-nough ?
The software used for EPC assessment has been overhauled and will be released shortly. As a result of this software change, a substantial number of homes (particularly solid wall homes) are likely to be upgraded to an E rating, so historic EPCs should be renewed.
That aside, all indications suggest that the required minimum energy efficiency rating will rise.
First, the Government’s Clean Growth Strategy: Executive Summary states:
“We want all fuel poor homes to be upgraded to Energy Performance Certificate (EPC) Band C by 2030 and our aspiration is for as many homes as possible to be EPC Band C by 2035 where practical, cost-effective and affordable”.
Secondly, bear in mind that the UK Government has committed to an 80% reduction in carbon emissions by 2050. Currently, the average EPC rating is D. To meet the 2050 requirements, the average EPC will need to be A. 2050 may be a long way off, but so too is any hope of achieving an A rating for some properties.
Accordingly, where there is funding available, any landlord with a property of a rating D or E should consider undertaking works.
Whilst time is short, Landlords of F / G rated properties looking to undertake works should seek to bring their properties up to at least a C if possible. Scraping by with an E rating is not a long term solution and any investment / expenditure should focus on achieving an improved rating.
1. The Golden Rule is that an energy efficiency improvement is only “cost effective” if the costs of the improvement will be discharged by savings in energy bills over seven years. If the energy efficiency improvements listed have been installed at the property, which can be installed “cost effectively”, the property may still be let despite carrying an EPC rating of F or G.