What you need to know about the Minimum Energy Efficiency Standard (MEES) in force for non-domestic tenancies from 1 April 2018.
In recent years there has been a general shift towards greener and more environmentally friendly and sustainable practices, landlord’s do you know how energy efficient your property is and whether it will comply with the new Minimum Energy Efficiency Standard (MEES)?
From 1st April 2018, landlords of commercial buildings within the scope of the MEES Regulations must not renew existing tenancies or grant new tenancies if the building has less than minimum level of energy efficiency of E i.e. F or G.
It is important to note that the minimum standard could rise in the future, and that from 1st April 2023 buildings which do not meet the minimum level of energy efficiency cannot continue to be let.
MEES does not apply to:
· Buildings which are not required to have an EPC: such as industrial sites, workshops, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties and holidays lets;
· Buildings where the EPC is over 10 years old or where there is no EPC;
· Tenancies of less than 6 months (with no right of renewal);
· Tenancies of over 99 years.
Properties and Transactions that are not subject to the MEES:
Landlords can let a building to which the MEES Regulations apply but which is below the minimum standard if any of the exemptions apply. These are:
1. Consent exemption - where consent from persons such as a tenant, a superior landlord or planning authorities has been refused or has been given with conditions with which the landlord cannot reasonably comply
2. Devaluation exemption - where an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%
3. Temporary exemption - are available to a landlord until six months after whichever is the later of:
(1) the date on which the landlord becomes, or continues to be, the landlord of a property by virtue of any of the circumstances set out below:
· Grant of a lease under a contractual obligation.
· A tenant's insolvency, by virtue of the landlord having been the tenant's guarantor.
· The landlord having been a guarantor, or a former tenant, who has exercised the right to obtain an overriding lease of a property
· Deemed creation of a new lease by operation of law.
· Grant of a new lease under Part 2 of the LTA 1954.
· Grant of a lease by order of the court not under Part 2 of the LTA 1954; or
(2) A court order is made for the grant of a lease not made under Part 2 of the LTA 1954
The exemptions are valid for five years only and cannot be transferred to a new landlord. Exemptions must be registered on the central government PRS Exemptions Register, which will go live on 1 April 2018.
Penalties for non-compliance of MEES:
The MEES Regulations will be enforced by Local Weights and Measures Authorities (LWMAs). LWMAs will have powers to impose civil penalties which are set by reference to the property's rateable value.
The penalty for renting out a property for a period of fewer than three months in breach of the MEES Regulations will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000. After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.
Where a property is let in breach of the MEES Regulations or where a penalty is imposed, the lease as between the landlord and the tenant remains valid and in force.
If you own or are looking to buy an investment property and would like further information please contact the Commercial Property team at email@example.com who can assist with all aspects of Landlord and Tenant matters.