Understanding Minimum Energy Efficiency Standards

Since April 2018 it has generally been unlawful to grant a tenancy of domestic property where that property has an Energy Performance Certificate rating (“EPC rating”) of F or G. Furthermore, from April 2020 it will become unlawful for any existing tenancies to continue where that property has an EPC rating of F or G.

These rules apply due to the Minimum Energy Efficiency Standards ( “MEES Regulations”). These regulations cover various types of domestic letting arrangements:

• Assured tenancies, including Assured Shorthold Tenancies ;

• ‘Rent Act’ tenancies;

• Assured Agricultural Occupancies; and

• ‘Protected’ Occupancies and Statutory Tenancies (Under sections 3 and 4 of the Rent (Agriculture) Act 1976).

In our dealings with agricultural property, particularly farmhouses and cottages, we are increasingly seeing properties with this type of rating. This is impacting not only on sales and lettings of these properties, but also the mortgaging of farms. As such the issue needs to be identified at an early stage to avoid delays in the transaction.

Exemptions

There are some limited exceptions to these rules where it may be permissible for a letting to be granted or to continue where the minimum EPC rating is not met.

“Consent Exemption”

In broad terms, this exemption applies where a tenant has refused to consent to the proposed alterations to the property to increase the EPC rating. This will only apply where the tenant’s consent is required for the works to be undertaken. The exemption also applies where third party consent cannot be obtained, such as those required from a planning authority.

For this exemption to apply the landlord will need to have registered the “necessary information” on the PRS Exemptions Register before the landlord seeks to rely on the exemption.

“Devaluation Exemption”

This exemption can apply where the landlord obtains a report from a surveyor which states that making the necessary energy efficiency improvements would result in a reduction of more than 5% in the market value of the property or building. The surveyor has to be a RICS Valuer.

Again, the landlord must ensure the “necessary information” is logged on the PRS Exemptions Register so that the exemption can be relied upon.

“Temporary Exemption”

Also, in limited circumstances, a temporary exemption of up to 6 months can apply, but these are very fact specific and are unlikely to apply in most circumstances. A temporary exemption cannot, for instance, be obtained owing to a general delay in getting improvement works done, or because of a lack of financial means to undertake those works.

Practical Steps

Obtaining any of these exemptions is not straightforward and as the financial penalties for failing to comply with the MEES Regulations can be as much as £4,000 (and higher for non-domestic property) it is important that proper advice is sought.

Some practical steps which can be taken include:

• Obtaining a new EPC for the property to ensure the EPC rating is up to date;

• Checking whether any exemptions apply, and if so completing the PRS Exception Register as necessary; and

• Seeking professional advice at an early stage.

If you would like to speak to someone about any of the issues raised in this article please contact Daniel Edwards, who is an Associate within Lupton Fawcett’s Agricultural Property Dispute Team.