From 1 April 2023 it will become unlawful for a landlord of non-domestic property to “continue to let” a sub-standard property, unless an exemption applies. A landlord continues to let where a lease runs beyond the start of April 2023.
Substandard, at this time, means that a building does not have a valid energy performance certificate (EPC) rated above a Grade E. So ratings F and G are substandard EPC ratings.
By way of reminder, MEES have applied to the granting of new leases and lease renewals since April 2018. Since then, it has been unlawful for a landlord of a substandard non-domestic property to grant or renew a lease unless an exemption applies.
With Grant Shapps new department for Energy Security and Net Zero being tasked with approving the energy efficiency of buildings it seems that the enforcement of MEES may now move more into focus.
Four top tips for landlords
1. If you are a landlord of a lease where there is no EPC (because it was not required or has expired since the property was let) then think carefully about obtaining an EPC. The MEES regulations only apply where there is an EPC in place. There is no liability until there is an EPC under a Grade E. If you want to know what your EPC rating is without officially obtaining an EPC you can obtain a draft EPC that won’t trigger the application of MEES. This will allow you to gauge costs of remedial works. However, remember unless expressly prohibited in your lease your tenant can obtain an EPC too. Once an EPC has been obtained it will bind the building.
2. If you have a current EPC and know your property is substandard and currently let, you need to consider your position – now (!). If appropriate, you should seek to register an exemption in advance of breach. Exemptions do not apply automatically. You have to register them on the Private Rented Sector Exemptions Register. Conditions of each exemption must be met and often supporting documents and evidence are required.
3. If remedial works are required you must consider how you will practically do the improvement works and meet the costs. Can landlords pass them on or share them with occupiers? Much of this will be determined by the terms of the lease.
4. Careful due diligence is critical when acquiring tenanted property. Landlords that continue to let by virtue of an acquisition can apply for a six month window after acquisition before compliance with MEES is required. On expiry, landlords must have carried out the required improvements or registered their own 5 year exemption as exemptions cannot be inherited.
The penalties for non-compliance with MEES may be a fine up to a maximum £150,000 as well as the reputational damage risk.
Looking into the future, further changes to MEES are anticipated. Most notably the raising of the minimum standard to EPC B by 2030. We will keep you informed as matters progress so please look out for further updates here.
If you would like assistance with MEES we are here to help. Please do get in touch with an experienced member of the Thomson Snell & Passmore Commercial Property team.