What are MEES?
With the Energy Act 2011 has come the introduction of the Minimum Energy Efficiency Standards (MEES). Whilst MEES will impact on both residential and commercial property, this update will focus only on the latter.
MEES require the landlord of a property, which has an Energy Performance Certificate (EPC), below an ‘E’ rating, to carry out any necessary works to ensure the property is brought up to a minimum E rating.
MEES will only apply to properties with a current EPC: if a landlord has not complied with a requirement to obtain an EPC, it appears MEES will not apply. MEES will also not apply to leases which have a term of six months or less as well as leases which have a term of ninety-nine years or more.
Government research estimates that 18% of privately rented commercial properties currently fall below the minimum standard introduced under MEES, by having an ‘F’ or ‘G’ rating.
When must MEES be complied with?
For new leases and sub-leases (including renewals, extensions, surrenders and re-grants), MEES will apply from 1 April 2018.
For existing leases and sub-leases, MEES will apply from 1 April 2023.
Potential consequences of non-compliance with MEES
Landlords that fail to ensure a minimum E rating in their property may face a civil penalty in the form of a fine. The level of fine will depend on the length of non-compliance and the rateable value of the property.
The maximum fine for breach of MEES will be £150,000.
How landlords can ensure compliance with MEES
To ensure compliance with MEES, landlords should observe the following:
- Identify any properties which fail to meet the minimum E rating and complete any necessary works to comply with MEES.
- Check the provisions within each lease to determine whether the costs of any necessary works can be recovered from the tenant and whether a right to enter the property has been reserved to facilitate the works.
- Agree a timescale with each tenant in advance of the works to be undertaken.
- Landlords intending to grant new leases to existing tenants, whom will continue beyond 1 April 2023, should reserve the landlord’s right to carry out any future works necessary to ensure compliance with MEES.
- Landlords should ensure that on granting any new leases, that the costs associated with works necessary to comply with MEES are recoverable from the tenant.
Do any exemptions exist?
Landlords are able to rely on the following exemptions, which must be entered on a central register which will be set up by the Department for Energy and Climate Change:
- Where the completion of any works necessary to ensure compliance with MEES would result in a reduction of more than 5% of the market value of the property. The landlord must obtain a report from an independent surveyor evidencing this.
- If the landlord has made all reasonable endeavours to obtain the consent of the tenant to carry out the works, if such consent has not been forthcoming.
- If the landlord can evidence that the works will not pay for themselves in energy savings over a seven year period.
Why landlords should act now
MEES may not take effect until 1 April 2018, but given the potential fines from being in breach, it is advisable to take the necessary steps to ensure compliance.
Tenants may be reluctant to allow access to the property or for the works to be completed. In this situation, landlords must inform the tenant of the change in law and promote both the cost and environmental benefits of having an energy efficient property.
For further information regarding this topic or any other property and construction matter, please contact the Edwin Coe Property team.