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Residential energy lettings MEES Landlords

Time is running out to meet new rules on energy standards for let properties

Q1 2018

Landlords have just a month to register for an exemption or ensure they comply with new energy standards for let property which are due to come into effect on 1 April 2018, warns property, estate management and farming specialists Strutt & Parker.

Under the Minimum Energy Efficiency Standards (MEES), landlords will be unable to let any property with an Energy Performance Certificate (EPC) below an E grade from the end of March.

This applies to all residential and commercial property where a new letting is being conducted or a lease is being renewed.

From April 2020, the existing tenants of residential properties will also be covered by the regulations.

Laura Fieldsend, rural surveyor in land management department of the Northallerton office of Strutt & Parker, said: “A challenge for landlords affected by this new legislation is that the guidelines they are being asked to work to are currently under review.

“The original 2015 regulations said that a landlord only had to make improvements to a sub-standard property where it could be done at no cost to themselves, accessing funding through the government’s Green Deal or third-party financing. However, the Green Deal is now privately owned with lower levels of funding available, so the opportunities to carry out work at no cost are limited.

“The Department for Business, Energy and Industrial Strategy launched a consultation in late December which said from 1 April 2019 it would like to remove the ‘no-cost principle’ enshrined in the original regulations and replace it with a cost cap for the installation of energy efficiency measures. It has been proposed that a landlord who owns a property with an F or G EPC rating would be required to first obtain a recommendations report and then spend up to £2,500 per property to make improvements.

“The complication is that the consultation does not close until 13 March 2018, yet the MEES standards apply from 1 April. So until we have an official announcement on the way forward then the current guidance still stands.

“Landlords have a choice – they can either decide to make an investment in energy efficiency measures now and pay for them themselves. Alternatively, they can check if any Green Deal funding is available to them and, if not, register for an exemption on the grounds that the existing regulations still say that improvements should come at no cost to the landlord.

“If the proposed cost cap is agreed, it is also worth noting that the £2,500 limit could include works done from October 2017. It is therefore important to keep a record of all maintenance works and consider whether any of these would be classed as improving the energy efficiency of the property.”

Landlords who fail to take action to get their property up to the required standards, or register for an appropriate exemption, risk fines of up to £5,000 per domestic property.

To gain an exemption, the property will need to be registered on the PRS Exemptions Register.

Only properties that require an EPC will be subject to the MEES regulations.

Examples of ways to bring a property up to the required EPC standard could include improving insulation, installing a new boiler, solar panels or renewable heating system, or fitting double glazing.

There are other exemptions to the standards which may apply – if, for example, a tenant refuses to allow improvements, or if energy improvements would result in a 5% or more devaluation of the market value of the property.

Mrs Fieldsend added: “Landlords who require a new EPC because their current certificate is coming to the end of its 10-year life, are advised to engage a quality EPC assessor. The EPC is becoming more important, given it is the determining factor under the MEES regulations, so landlords should avoid buying on price. Paying £100 or so for a quality assessment of a property is a very small price to get an accurate EPC which in most cases will actually improve the rating.”

For more advice and information please contact Strutt & Parker’s Northallerton office on 01609 780306.