Minimum Energy Efficiency Standards (MEES)
Minimum EPC rating of C????
There has been huge amounts of incorrect reporting in the mainstream and industry specific press about proposals to regulate all PRS properties, banning those with an EPC rating lower than C from being let.
At the time of writing, (June 2023), there is no proposed published government legislation. The most up to date information is that the government is planning to implement legislation on this topic, with a deadline of 2028 for all landlords to be compliant.
The key information which we’re waiting for is an understanding about how much landlords will be expected to pay to get to a rating of C, and what support and financing will be made available.
Landlords do not need to do anything about this now, but must have an eye on it, and start planning.
If/when the legislation is introduced there will be a fight for resources to get the work done to improve the whole UK PRS stock.
What are the proposed regulations?
The government has stated its intention in The Energy White Paper, published in Dec 2020 that they want “as many existing homes as possible to hit EPC Band C by 2035 where practical, cost-effective and affordable.”.
The 2020 consultation does set out a “preferred policy scenario” that the privately rented properties will require an EPC rating of C for “new tenancies from 1 April 2025 and all tenancies by 1 April 2028”. This is one of a number of different implementation scenarios discussed in the consultation.
At the time of writing (June 2023), there have been reports that if/when legislation is brought in the dates would be pushed back by three years, with the 1st phase starting 1st April 2028, rather than 2025.
The government has not yet published or sponsored a bill in parliament. There have been two private members bills introduced, you can follow the progress of the latest one here. Without government sponsorship or support, it is very unlikely that a private members bill make it into law.
The summary of all of the consultation and private members bills are that landlords would be required to have a minimum EPC rating of C, for any new tenancies created from 2028, and that all PRS properties should have an EPC rating of C from 2030, unless, it is cost prohibitive for landlords to achieve that; what that limit is, will be set by and can be changed in the future by the Secretary of State.
The Secretary of State will have the power to define what is practical, cost effective, and affordable. Currently landlords are only expected to spend up to £3,500 per property to achieve a rating of E.
The consultation paper talks about a figure of £10,000 (inc vat) being a figure which would meet this criteria and expected that landlords would have up to seven years to plan and save for the works.
“Under proposals set out in this consultation our modelling indicates that on average, landlords will spend £4,700 per property to reach EPC C, if a maximum cap of £10,000 on the total investment on current prices (and inclusive of VAT) is set. This cost cap is the optimal level at which a majority of PRS properties would be improved to EPC Band C (~70%) whilst trying to limit expense for landlords (reflecting the CGS commitment that improvements should be cost effective and affordable).”
“In addition the development of a green home finance market would help landlords borrow money against the value of their assets in order to fund the energy performance improvements; this is something we are testing through our Green Home Finance Innovation Fund (42) and our planned consultation on the role of mortgage lenders in helping households improve energy performance of homes they lend to. Landlords are further encouraged to apply for vouchers under the Green Homes Grant scheme to fund at least two thirds of the cost of hiring tradespeople to upgrade the energy performance of their PRS properties up to a contribution of £5,000 when the scheme officially launches at the end of September.”
The problem here is that landlords won’t be inclined to spend any significant amounts on improving energy efficiency until they know what the affordability figure is, which won’t be until late on in the process or even after the bill becomes law if the power is to be retained by the Secretary of State, who may then change the affordability figure as they see fit in the future.
For now, it seems sensible for landlords to look at including improvements in energy efficiency when carrying out any works to their properties, wait and watch to see if the bill becomes law, and make some financial provisions in case it does.
What are the current regulations?
What is an EPC?
Energy Performance Certificates (EPCs) serve as a standardized measure of a property’s overall energy efficiency. They provide prospective tenants and buyers with an understanding of a property’s energy use and typical energy costs. Each certificate also suggests measures that can improve the property’s energy efficiency.
Do I need an EPC?
The legislation governing Energy Performance Certificates (EPCs) for landlords in England and Wales is outlined in The Energy Performance of Buildings (England and Wales) Regulations 2012.
The regulations state that landlords need to “secure that an energy performance certificate has been given free of charge to the person who ultimately becomes the tenant.” Furthermore, it specifies that the EPC must be provided “as early as possible and in any event no later than whichever is the earlier of (a) the time at which any written information about the building is provided in response to a request for information received from the prospective tenant; and (b) the time at which a viewing is conducted.”.
Can I advertise a property before having an EPC?
Before a building is listed for sale or rent, an energy performance certificate must be ‘commissioned’. Efforts should be made to get this certificate within seven days of listing, but if it isn’t possible despite best efforts, it should be obtained within an additional 21 days.
What do I need to do with the EPC?
If a building is to be sold or rented, the relevant person must provide a valid EPC free of charge to any potential buyer or tenant as soon as possible.
The EPC must be provided no later than the following times:
a. If a potential buyer or tenant asks for information about the building, the EPC must be provided when the relevant person first gives them any written information about the building.
b. If a potential buyer or tenant requests to view the building, the EPC must be provided when they view the building.
If the potential buyer or tenant consent, the EPC can be shared electronically with them.
- However, the relevant person doesn’t have to provide the EPC if they reasonably believe that the potential buyer or tenant: a. Probably doesn’t have the funds to buy or rent the building. b. Isn’t genuinely interested in buying or renting a building of the same general type. c. Isn’t someone the relevant person would likely be willing to sell or rent the building to.
The relevant person must make sure that the EPC is given free of charge to the person who eventually becomes the buyer or tenant.
When a building is advertised for sale or rent in commercial media (including property listing sites), the advertisement must include the energy performance indicator for the building, taken from the EPC.
The exact format of the EPC indicator can vary depending on the advertising medium, but for online advertising, it typically involves including the EPC graph or at minimum, the EPC rating.
What are the current Minimum Energy Efficiency Standards?
From 1st April 2018 landlords and agents will have not be able to issue new tenancies for any properties that have an Energy Performance Certificate (EPC) rating of F or G. From April 2020, existing tenancies were covered by the same regulations.
The minimum energy efficiency standards (MEES) cover rental properties in England and Wales and apply to any property that:
- Has an existing EPC
- Requires an EPC
- Is within a larger unit which requires an EPC
Certain lets, such as bedsits or rooms in houses in multiple occupation (HMOs) do not require their own EPC. However, if the building they are in has a current certificate that does not reach the required E standard, these units cannot be let without improvement work being done.
This extract is taken from Government guidance:
“Please note that there is no obligation to obtain an EPC on a letting of an individual non self-contained unit within a property, such as a bedsit or a room in a house in multiple occupation (HMO). However the property in which the unit is situated may already have its own EPC covering that property as a whole; this could be because the property had been bought within the past ten years, or because it had previously been rented out on a whole-property basis. If a property as a whole has a valid EPC and that EPC shows an energy efficiency rating of F or G, then the owner/landlord will not, from April 2018, be able to issue new tenancies for non-self-contained units within the property until steps are taken to comply with the Regulations.”
If the MEES do apply, then there are still some reasons that for non-compliance:
- The improvement works will devalue the property by 5% or more
- The landlord cannot get consent to carry out the works either from the tenant, mortgage lender or superior landlord
- If the landlord cannot afford to carry out any improvement works
- If the relevant improvement works have been carried out but the energy rating remains under a rating of E
These exemptions must be logged with the Public Exemption Register for them to be considered legitimate. If approved, the exemption will be in effect for five years. (See: https://prsregister.beis.gov.uk.) Local Authorities are informed when exemptions are logged.
After this time, the landlord must have rectified the issue, or apply for the exemption again.
Applications for exemptions must be made using a selection of evidence to show why the criteria cannot be met. This can include written reports by independent agencies, such as RICS approved surveyors.
The law states that changes made to the property should not result in an upfront or net cost to the landlord. (See exemptions, above.)
This means that the law only requires landlords to make changes that will bring their property within acceptable levels to reach an E grade EPC rating.
It is up to each landlord to decide what changes they make to the property, the Government’s concern is that the property’s energy efficiency is improved.
Landlords who need to make any changes would need to access The Green Deal. This was introduced in 2013 to help provide financial assistance to fund necessary improvements.
The deal enables landlords and homeowners to take out loans to pay for energy efficiency and repay the money overtime through their power bill.
The idea being that, as you save on your energy costs through improved energy-efficiency, this money pays back the loan. This is a so-called Pay as You Save (PAS) scheme.
Applications can be made through your local Green Deal Provider. (See: www.gdfc.co.uk.)
Local Authorities are responsible for enforcing MEES and have the authority to issue fines.
“Where the landlord has let a sub-standard property in breach of the Regulations (see section 1.2) and has been in breach for less than three months at the time the penalty notice is served, the enforcement authority may impose a financial penalty of up to £5,000, or of up to 10% of the rateable value of the property (whichever is greater), subject to a maximum financial penalty of £50,000.”“Where the landlord has let a sub-standard property unlawfully (see section 1.2) and has been in breach for three months or more at the time the penalty notice is served, the enforcement authority may impose a financial penalty of the greater of up to £10,000 or 20% of the rateable value of the property (whichever is greater), up to a maximum of
£150,000. The enforcement authority may also impose the publication penalty.”