Recent changes made to the Minimum Energy Efficiency Standard ( MEES) regulations may require residential Landlords to spend up to £3,500 of their own money per property in order to improve the energy efficiency of their residential portfolios.
The MEES for properties that are to be let, came into force initially on 1st April 2018 and the regulations apply to both commercial and residential properties. This article considers only the rules relating to residential properties. Initially, landlords of substandard residential properties (those with an EPC rating of F or G) were required to upgrade the energy efficiency of their properties only if this could be done at no cost to the landlord. The regulations anticipated that this would be achieved by way of one or more of a Green Deal finance plan, the Energy Company Obligation (ECO) or a Local Authority Grant. In practice, the Green Deal under which a landlord could borrow money to undertake specified energy efficiency improvement works was withdrawn in 2015 when the Treasury refused to continue to fund it. There remain some Green Deal providers, but insufficient to carry out all the works that are expected to be required.
The underlying rationale for MEES is that the Government is keen that residential landlords should have some obligation to carry out works to improve the quality of the private residential tenanted housing stock.
After consultation with interested bodies, the amended MEES rules have been implemented and take effect from 1st April 2019. This means that for new assured shorthold tenancies granted to a new tenant (or a renewed tenancy for an existing tenant) on or after that date, the landlord must either ensure that the EPC rating for the property is at least E before the Lease is granted (possibly spending up to £3,500 for the property of the landlord’s own money in order to do so) or to register an exemption on the exemption register where one or more of the detailed exemption criteria are satisfied. The regulations contain detailed provisions with regard to establishing an exemption which can be difficult and time consuming to achieve with the result that landlords may now be expected to spend their own money ( subject to a cap of £3,500 ) in order to achieve the required energy efficiency standard.
Government data indicates that a cap of £3,500 per property will enable 48% of substandard properties to be improved to an E rating and as the Government estimates there are currently about 290,000 rented residential properties with F and G ratings it is envisaged that approximately 139,000 properties will be brought up to an E rating standard.
It should be noted that whilst the MEES will currently only apply where a new lease has been granted since 1st April 2018, with effect from 1st April 2020 MEES will apply to all residential properties that are tenanted, regardless of when the lease was granted, and therefore all landlords should be looking at their portfolios now to achieve compliance with MEES from those dates, where they have not already put this in hand.
If you require any advice please contact Richard Watkins, Director on 01905 730450 or email email@example.com