Currently Trending- #MEES (Part 1)
Not sure if the Death Star in Star Wars would have complied with MEES, and we’re not entirely convinced how energy efficient those light sabres are either, but here on planet GB we all know the white elephant in the room is the Minimum Energy Efficiency Standards (such a mouthful that there is an acronym for it)! There is no escaping MEES.
Under the Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 (“the Regulations”) new or renewal leases of commercial property cannot be granted as of 1 April 2018 if the property has an EPC rating of F or G; and from 1 April 2023 landlords cannot continue to let or sublet a property which falls below this current MEES benchmark. Long leases of 99 years or more, or short leases of less than 6 months with no renewal rights and where the tenant has not already been in occupation for a continuous period of 12 months are excepted.
MEES only applies to properties which are legally required to have an EPC. If a building is of a type that is exempt from having an EPC then it will not need to comply with MEES. Some examples of buildings which are exempt from having an EPC include, those which are due to be demolished, places of worship, temporary buildings with a planned use of two years or less and certain industrial storage sites or workshops with low energy demand.
Listed buildings continue to be a grey area and to date the guidance issued by the Department for Communities and Local Government (DCLG) has failed to provide clarity on this confusing issue. When in doubt, always consult a reputable energy assessor to check and ascertain whether a property requires an EPC.
Regrettably both the Regulations and the guidance issued by the Department for Business, Energy and Industrial Strategy (DBEIS) (which conflicts with the guidance issued by the DCLG on EPCs particularly when it comes to lease renewals) has raised more questions than answers and unfortunately this unsatisfactory state of affairs will continue until the government or the court determines the position and or provides clarification.
For those involved in the dark arts of commercial property, there are plenty of areas to get thinking about.
In the first of our special ‘MEES’ series, we look at energy efficient works vs improvement works and when might be the best time to get started! Future features will include key points for tenants and landlords to think about; possible tenant covenants to include; rent reviews and finishing up with dilapidations.
Energy Efficiency Improvement Works
MEES improvement works or works to prevent a property falling below the minimum EPC rating are improvement works. However, there will no doubt be landlords out there who may wish to try arguing that they are repairs and should be part of the responsibility of the tenant’s covenant to “put and keep in good repair and condition”.
On the other side of the coin, there will be plenty of landlords who care enough about their assets, green eco credentials and sustainability who will carry out any necessary efficiency improvement works at their own expense not just to ensure that their assets are at least an E rating, but who may try to raise the rating to above this minimum standard as part of good estate management.
Some will be pondering the burden of carrying out the energy efficiency improvement works and the cost that comes with it.
For those with properties which are F or G rated, note that whilst the Regulations prohibit a landlord from letting a property which is F or G rated (unless it has applied for and registered one of the exemptions under the Regulations), the Regulations do not impose an express statutory duty on either landlords or tenants to carry out the works to improve energy efficiency. The prohibition on letting and the carrying out of the works are two separate things. Some landlords and tenants may therefore jostle to try and foist this burden on to each other or perhaps come to an arrangement to share the burden.
Also note that the Regulations provide that the letting or continuance of a letting in breach of the Regulations does not affect the validity or enforceability of any provisions of the tenancy itself. A lease granted in breach of the Regulations is still a valid and enforceable lease and the parties cannot rely on the fact of the breach to escape their respective obligations under their lease.
Some landlords will wonder whether they need worry about complying with the Regulations and MEES if the leases remain valid and enforceable as between landlord and tenant even though their continued letting is in breach of the Regulations.
This is where they must fear the wrath of the Storm Troopers of the local weights and measures authority for their area who will be enforcing compliance through either Trading Standards or Environmental Health. Penalties for non-compliance will be based on the rateable value of the property and can be for up to a maximum of £150,000 per occasion depending on how long the breach has gone on for. The other possible penalty is being named and shamed on the PRS Register.
Think about when might be the best time to carry out such works
Landlords with properties with F or G rated properties (or perhaps even those with an E who want to attempt upgrading) may want to take advantage of void periods or lease breaks to carry out energy efficiency improvement works or include the carrying out of such works as part of ongoing maintenance and renewal programmes.
Yes, the way ahead is full of challenges. “May The Force be with you.”
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.