Landlords: Don’t be an April Fool!

From 1st April 2018, under the new Minimum Energy Efficiency Standards (MEES) Regulations, it will be unlawful to grant a new lease or tenancy for most residential and commercial properties with an EPC banding of less than “E”.

When a property is to be sold or rented, the owner or landlord must obtain an Energy Performance Certificate (EPC). An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and provides recommendations about how to reduce energy use and save money.

From 1 April 2018, all newly tenanted Properties will require an EPC rating of at least an “E” unless the Landlord registers an exemption. This means that any property with an EPC Rating of “F” or “G” will require sufficient measures to be carried out to bring the rating of the Property to at least an “E” rating, before it can be rented out. Existing leases/tenancies may continue for the time being, even on properties not meeting this criterion.

Failure to carry out energy efficiency improvements could result in hefty fines.

From the 1^st April 2023, Landlords will not be able to continue to rent out any residential or commercial property with an EPC Rating of “F” or “G”.

There are FOUR exemptions to the rule. These are:

• The ‘Golden Rule’:The expected financial savings over a period of seven years must be equal to or greater than the costs of the improvements.
• Devaluation:where an independent surveyor determines that the improvements are likely to devalue the property by more than 5%.
• Consent:where consent for access is being withheld by the tenant.
• All improvements: All possible energy efficiency improvements have been carried out to the property already.

If you think that the rules to do not apply to you because your property is listed – think again! The MEES Regulations have tightened up this exclusion. Listed Buildings are now only exempt in circumstances where the ‘relevant’ energy efficient improvements would alter the property’s appearance. However, there are many improvements that do not alter the appearance of the building and you will be required to have a registered exemption, as above.

Exemptions must be registered on the PRS Exemptions Register, which will be live from 1^st April 2018, and are valid for five years.

Clearly, the regulations mean that the EPC rating will now become a crucial concern for purchasers and the rating WILL affect the market value and saleability of all properties.

Landlords should be considering their current portfolio to identify which properties are affected by the MEES Regulations and whether exemptions will apply.

Further guidance has been published by the Government: Guidance for Landlords (PDF)