The government has released a consultation on raising the minimum energy efficiency standards in tenanted non-domestic properties.
Landlords have just over 6 years to get properties up to an EPC C standard and then a further 3 years to get them to B. If those levels cannot be reached, an exemption may be available. Failure to comply with the requirements, could lead to a fine.
The consultation looks at a number of the points that were discussed in our article on Minimum energy efficiency standards – will a B rating be required by 2030?, opting for the incremental milestones approach. It is, therefore, proposed that properties must be at an EPC level C by 1 April 2027, increasing to level B by 1 April 2030. If these levels cannot be met by the relevant milestones, the landlord must have registered an exemption. Failure to do so could lead to a fine.
One critical change to the current regime is that a landlord of rented non-domestic properties must have a valid EPC at all times. The current system only puts a property within the scope of the Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 (the MEES Regulations) if there is a valid EPC in place. This means that if the EPC is more than 10 years’ old (rendering it no longer ‘valid’), a property can fall outside the obligations in the MEES Regulations. The changes proposed in the consultation will make it clear that all let properties are within the scope of the MEES Regulations.
The position in relation to listed properties, EPCs and the MEES Regulations, is currently unclear. Listed properties are within the scope of the MEES Regulations if they are legally required to have an EPC. However, government guidance states that an ‘EPC is not currently required for a listed property or building within a conservation area when it is sold or rented in so far as compliance with minimum energy performance requirements would unacceptably alter its character or appearance.’ This effectively means that, in order to decide whether works would unacceptably alter character or appearance, an EPC is required.
The consultation sets out that an EPC will be required for listed properties, and those in conservation areas. These properties will fall within the scope of the MEES Regulations, but an exemption may be relevant. For example, the consent exemption could be used if the local planning authority will not give consent for energy improvement works to be carried out.
Currently a landlord has to get a property up to the required standard in order to let it to a tenant. However, the tenant may immediately remove the measures installed by the landlord so that it can fit the premises out as it requires. This is not only a waste of time and money for the landlord (money that it will pass on by way of an increased rent), but the tenant may be reducing the EPC rating of the premises.
The consultation proposes that shell and core let properties should benefit from a grace period of six months to enable the parties to get them to the required standard.
Another area of the current regime that has been subject to criticism is the requirement to get 3 quotes for works in order to assess whether or not they meet the seven-year payback test. It is, therefore, proposed that this be replaced by a user-friendly ‘payback calculator’.
The consultation proposes that letting agents and online property platforms should only be able to advertise and let properties compliant with the MEES Regulations. It is hoped that this will strengthen the existing enforcement regime and encourage greater compliance. Changes are also envisaged to the enforcement period for penalty charge notices.
In addition, it is intended that current PRS Exemptions Register be expanded to capture all properties that should be in the scope of the MEES Regulations, so as to enable local authorities to more easily police compliance.
In addition to the current £5,000 (plus publication penalty) that can be imposed on landlords for registering false or misleading information, or failing to act on a compliance notice, the consultation proposes fines of £5,000 for the following breaches:
The current fine of up to £150,000 for letting a property in breach of the MEES Regulations would remain.
The consultation is open until 9 June 2021.
TLT has extensive expertise in advising on the MEES Regulations. If you want to discuss, please get in touch.
Contributor: Alexandra Holsgrove Jones
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions.
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