Landlords of domestic private rented properties are undoubtedly au fait with the requirements to have a valid Energy Performance Certificates (EPCs) confirming the Energy Efficiency Rating of their properties. They will recognise that under the Minimum Energy Efficiency Standards (MEES) Regulations they are required to ensure that their domestic private rented properties meet those standards as set out (subject to some limited exemptions).
It may, however, have come as a surprise that on 1 April 2020 the MEES requirement that any property falling into a sub-standard rating (i.e. a band rating of F or G)) changed so that they not only prevent the Landlord from granting a new tenancy, extending or renewing an existing tenancy but also prohibit the continued letting of the property. Where a property is sub-standard, the Landlord must carry out “relevant energy efficiency improvements” to bring the property up to the standard or register the exemption as to why the works cannot be carried out/ the Landlord cannot comply with requirements with the PRS Exemptions Register.
For the purposes of the MEES regulations, domestic private rented properties are not only properties let under a tenancy that is an assured tenancy for the purposes of the Housing Act 1988 but also those recognised as a regulated tenancy for the purposes of the Rent Act 1977 or a tenancy specified in an Order made by The Secretary of State. There are, of course, exclusions from this definition such as low-cost rental accommodation provided by a private registered provider or social housing.
It is worth bearing in mind that the validity or enforceability of a tenancy is not affected by a letting of a sub-standard property as the Landlord cannot terminate tenancy because they have failed to comply. However, the Landlord will still be in breach and will be liable to enforcement action from the appropriate regulatory and enforcement authority.
The enforcements for domestic private lettings are usually in the form of penalty notices and are as follows:
(a) For letting a sub-standard property for less than 3 months from service of the penalty notice is up to £2,000;
(b) For letting a sub-standard property for 3 months or more from service of the penalty notice is up to £4000 and the penalties can also be published; or
(c) For failing to provide the enforcing authority with information required to be supplied pursuant to a compliance notice is up to £1000 for domestic property and the penalty can also be published.
There may be a plethora of reasons why such improvements have not been carried out, or at least not immediately, and so the regulations set out four exemptions:
1. Consent – this is usually where, despite reasonable attempts, the Landlord cannot obtain any necessary third party consent to carry out the works (such at the occupants or the Heritage office for Listed Buildings). This exemption lasts for five years;
2. Devaluation – a situation where an independent surveyor states that the relevant works would devalue the property by more than 5%. This exemption lasts for five years;
3. Temporary exemption – following certain events such as a new Landlord having acquired the property or the grant of a renewal lease under the Landlord and Tenant Act 1954. This exemption for six months;
4. Nothing more to be done – this is a scenario all “relevant energy efficiency improvements” have been carried out, or there are none which can be made. This exemption lasts for five years.
However, these exemptions have many of their own requirements and are heavily caveated so any Landlord looking to rely on these must meet the criteria. Where an exemption does apply and has been validly registered, the Landlord will lawfully be able to let the substandard property for the period of the exemption.
What does this mean for Landlords of domestic private rent properties? For the majority, if the EPC shows properties within Band E or above, there should be nothing to worry about; however, those who have a property with a rating within bands F or G they may want to seek advice on what the works are, whether they can apply to go on the exceptions register and what exceptions could apply.
Furthermore, a prudent Landlord may consider;
• Checking the rating on the EPC, when you are buying a property to let, and bearing in mind you may need to improve the energy efficiency of the building in future or at the point of completion the sale to comply with the MEES requirements; and
• Considering whether it may be possible to incorporate some provision into the Lease requiring either the tenant to bring the property up to standard or else allowing you the Landlord to enter the premises during the term of the lease to bring it up to standard at the cost of the Tenant.
There is current commentary that the Government may re-consider this legislation following Brexit, when it would be able to depart from the EU directive behind the Energy Act 2011. However, nothing has been published to indicate this will occur.
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