Minimum Energy Efficiency Standards (MEES) – Are you ready?

The Energy Act 2011 required the introduction of measures to improve the energy efficiency of both domestic (residential) and non-domestic (commercial) private rented buildings in England and Wales.

The following key measures were introduced by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (‘Regulations’):

1. The Regulations enable a tenant of domestic private rented property to request the landlord’s consent to the tenant making energy efficiency improvements to the property, notwithstanding restrictions on making improvements in its lease. Such consent may not be unreasonably withheld, subject to certain exemptions.
2. The Regulations also provide that where a domestic or non-domestic property is sub-standard because its energy performance falls below the minimum level of energy efficiency of a band E EPC (that is, band F or G), subject to exemptions, a landlord may not:

• grant a new tenancy or extend or renew an existing tenancy of a private rented property (both domestic and non-domestic) on or after 1 April 2018;

• continue to let a domestic private rented property on or after 1 April 2020; or

• continue to let a non-domestic private rented property on or after 1 April 2023.

It should be noted that the band E threshold could be raised in the future.

While the Regulations do not impose a positive obligation to undertake energy efficiency improvement works, landlords will be prohibited from letting sub-standard property unless they undertake relevant energy efficiency improvements or obtain the benefit of an exemption.

Key exemptions in this respect are:

• All cost effective energy improvements works have been undertaken (being works that would cost less than the resulting energy savings over a period of 7 years) and the EPC rating remains below band E;
• The landlord has been unable to increase the EPC to band E owing to the tenant or a third party refusing to provide necessary consents;

• an independent surveyor has determined that the energy efficiency improvements would result in a reduction of more than 5% in the market value of the property;

• various temporary exemptions, which apply where the landlord acquires a property already subject to leases, or where the landlord is required to grant a lease pursuant to a statutory or contractual obligation to do so. The Landlord must then comply with the Regulations or determine that one of the principal exemptions applies within six months.

While there is currently no settled industry practice with regard to the Regulations, Landlords and prospective tenants should consider the implications of the Regulations and whether the lease should cater to MEES issues.

For more information, please contact our business services or commercial property teams.