Melanie Kendall-Reid summarises how the government has responded to property industry feedback in its long-awaited guidance on Minimum Energy Efficiency Standards.
Minimum Energy Efficiency Standards (MEES) are central to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, setting a minimum energy efficiency level at which non-domestic properties can be let.
There were several drafts before the final document was published, confirming that the regulations will demand a minimum E-rating in order for a non-exempt building to be let after April 2018. There has been a great deal of discussion around the interpretation of the requirements of the regulations, taking into account the array of scenarios under which a property can be leased.
Key areas that have been the topic of much debate are now included in the guidance as a direct result of industry feedback:
- EPC requirements: Where a building is required to have an EPC due to a sale, letting or modification, the landlord will be subject to non-compliance penalties for not registering a valid EPC. Where a building is exempt from requiring an EPC, or the need for a new EPC has not been triggered, the building will not be subject to the minimum standards. There is no requirement to obtain an EPC to comply with MEES.
- Multiple EPCs for buildings and demised spaces: With regard to multi-let properties, there are many situations where EPCs are registered and valid for both the entire building and its demised spaces. In such circumstances, the EPC for the demised space will be relevant. Where there is an EPC for the whole building only and the demised space does not require an individual EPC, the certificate for the whole building will be relevant.
- Listed building requirements: It is a popular misconception that all listed buildings do not require an EPC. This is only the case where the character or appearance of the property would be altered by compliance with the energy performance requirements; for example replacement, glazing or solar panel installations. The owner of such a property must seek appropriate advice on the requirement for an EPC.
- Responsibilities of landlords and superior landlords: It is clear that anyone who lets a building or part of a building on a qualifying lease must comply. There will therefore be occasions where tenants are also landlords. In addition, public bodies and local authorities acting as landlords will also be responsible.
- Green Deal availability: There is minimal reference to the Green Deal in the guidance documentation. However, there is clarification that as the Green Deal funding was never extended to the commercial property sector it is not applicable to comply at this time.
- Lease exclusions: The guidance is clear that leases are exempt if granted for six months or less where the tenant has not been in situ for 12 months or more and there is no provision for renewal beyond six months. In addition, leases granted for a term certain of 99 years or more are also exempt.
- Validity of EPCs: Where there is no requirement to renew the EPC and it expires during the tenancy, the property will not be required to comply with MEES. This will become of particular interest in 2023 as, if the EPC has expired and there is no legal trigger to renew it, the requirement to comply with the minimum standards will not be applicable as the regulations state that compliance is required where there is a valid EPC in place.
RICS Property Journal: http://www.rics.org/uk/news/news-insight/comment/theyre-finally-out/