Minimum Energy Efficiency Standards Now Impact Domestic Tenancies
Minimum energy efficiency standards now apply to existing domestic tenancies as they would for new lettings. What do you need to know?
The Minimum Level of Energy Efficiency Standard Regulations
Since 1 April 2018, it has been an offence under the Minimum Level of Energy Efficiency Standard (MEES) Regulations ('the Regulations') for private landlords to let properties on new tenancies, if the Energy Performance Certificate (EPC) rating is F or G, unless a valid exemption applies. The Regulations apply to both domestic (residential) and non-domestic properties (commercial).
The Energy Efficiency (Private Rental Property) (England and Wales) (Amendment) Regulations 2019 (SI 2019/595) ('the Amendment Regulations') came into force on the 1 April 2019. As a result of the Amendment Regulations from 1 April 2020, it is now an offence for private landlords to let (or continue to let) any domestic property which has an EPC rating of F or G. The Amendment Regulations therefore now capture existing residential tenancies. Landlords will need to make sure that let properties have a minimum EPC rating of E.
What Do the Regulations Apply To?
The Regulations and the Amendment Regulations which apply to domestic properties apply to properties let on assured tenancies, regulated tenancies or domestic agricultural tenancies. They apply only where the property has been marketed for sale or let, or modified in the past ten years.
If a property does not meet any of these criteria (eg it is vacant with no intention of being let), no action is required to improve its EPC rating.
Exemptions
Whilst landlords are required to carry out works to bring a sub-standard property's EPC rating within the minimum EPC rating of E, landlords are not required to spend more than £3,500 (inclusive of VAT) on those works and a new 'high cost' exemption has been introduced which applies if sub-standard property cannot be brought within the minimum EPC rating of E at a cost of £3,500 or less.
There are several other exemptions which allow a domestic property to be let with an EPC rating of F and G:
- where all relevant improvements have been made but the property remains sub-standard
- where wall insulation is not appropriate for the property
- where consent is needed for the improvement, has been sought and refused
- where the improvements would devalue the property by more than five per cent
- where a person has become a landlord suddenly and needs time to comply with the Regulations
These are not automatic exemptions. If the property meets the criteria of an exemption, the landlord is required to register an exemption with the PRS Exemptions Register before letting the property. Exemptions apply for only a limited period and need to be renewed. Registering exemptions can be time consuming process.
Penalties
Penalties for breaching the Regulations and Amendment Regulations include a maximum fine of £5,000 per property. This could result in a significant penalty for landlords who have several sub-standard properties across a portfolio of domestic properties.
As the Regulations now apply to all let domestic properties, it may be that we see more local authorities taking enforcement action against non-compliant landlords as there is no need to investigate whether the tenancy is a new or old and continuing agreement.
Landlords may have other concerns during the coronavirus (COVID-19) outbreak. However, they should still take the time to review their portfolios and make improvements where required or explore and register relevant exemptions.
To assist, the Ministry of Housing, Communities & Local Government have issued guidance for EPC assessments to be carried out in line with the social distancing measures in response to the outbreak.
1 April 2023
From 1 April 2023, the Regulations will also apply to existing non-domestic tenancies also. Landlords of non-domestic property therefore have three years to improve any sub-standard properties to a minimum EPC rating of E (unless an exemption applies) and should start thinking now about what improvements will need to be made before then.