March 27, 2018

New energy efficiency regulations will affect landlords and developers

News Article

Many businesses are unaware that, from April 2018, new laws come into force which set a new standard for minimum energy efficiency levels.

The new rules apply to both rented residential and commercial premises and will affect landlords, freehold investors, developers and lenders.

The Minimum Energy Efficiency Standard (MEES) was introduced in March 2015 by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 and has its origins in the Energy Act 2011.

But what does this mean in practical terms to landlords and developers? Paul Oldershaw, a Solicitor with Palmers, who is an expert in Commercial Property law explains: “Previously, residential and commercial buildings were given an energy efficiency rating of between A (the best performing) and G (the least energy efficient).

“The new laws will introduce a minimum standard of E – in effect outlawing G and this will mean that buildings cannot be rented out unless they meet the new energy efficient standards.

“Any existing tenancies will be allowed to run to the end of their term but, From 1 April 2018, landlords will, in general, not be able to renew or grant new tenancies for buildings which rate less than ‘E.’

“Additionally, by 1 April 2023, landlords will not be allowed to continue letting premises with a ‘G’ rating – which provides five years to improve any buildings which are the least energy efficient.

Paul continued: “However, the new rules are not entirely straightforward as MEES does not apply to all premises. For example industrial sites, workshops, non-residential agricultural buildings and certain listed buildings are just some of the premises which will be exempt from the new rules.

“In addition, buildings where an Energy Performance Certificate (EPC) is over 10 years old or where there is no EPC, tenancies of less than 6 months where there is no right of renewal and tenancies of over 99 years are also exempt.

“The legislation becomes even more confusing as there are a number of MEES exemptions if an independent assessor determines that all relevant energy efficiency improvements have been made or improvements would not pay for themselves within seven years.

“There is also a clause which states that work need not be carried out if it is likely to devalue the property by more than 5 per cent.

“Lastly, if a tenant, superior landlord or planning authorities refuse to allow the work to be done, there are grounds for an exclusion.

“Although the penalties for breaching MEES are high – with fines of up to £150,000 for noncompliance, many landlords and developers will be left confused by the new MEES rules and how they apply to their particular buildings.

“It is therefore important to seek specialist legal help to ensure that you are MEES compliant.”

To find out more about MEES and EPC regulations and how they apply to your residential or commercial property portfolio, please contact us.