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02nd May 2017

MEES Regulations 2015 and the challenges for Landlords

With less than 11 months to go until the MEES Regulations take effect, landlords of commercial premises should start (if they haven’t already) reviewing the energy efficiency of their let properties to ensure they are not caught by the Regulations come 1st April 2018. From this date, landlords will be prohibited from granting new leases or renewing existing leases where the property has an energy efficiency rating of an 'F' or 'G'. In addition, from 1 April 2023 any lease granted before 1 April 2018 which continues beyond 1 April 2023 will be prohibited if the rating is an 'F' or 'G'.
The Regulations may be amended in the future to catch properties with a rating of an 'E' (or even above) as pressure mounts for buildings to be more energy efficient. Also, due to changes in building regulations, properties which are currently an 'E' or higher may be downgraded when the EPC expires and a new one is commissioned therefore making the property fall foul of the Regulations. Landlords should therefore take note and be ready to carry out any necessary works to ensure compliance with the Regulations, failure of which could lead to fines.

The Regulations make clear that it is the landlord who must comply with the Regulations. Whether it is the landlord or tenant who pays for these works (the Regulations are silent on this) will be a matter of negotiation and will no doubt depend on the cost of the works, the length of the lease and who will ultimately benefit the most from the improved energy efficiency of the property. With that in mind, leases should now be appropriately drafted. The Landlord may want  to ensure it has  rights of entry reserved so it can  carry out works otherwise a tenant may be entitled to refuse such entry. A landlord may also want to prohibit a tenant from commissioning its own EPC so that the current rating is not downgraded.

There are exemptions which apply to the Regulations which will allow the landlord to continue to let the property despite it being deemed sub-standard. The mains ones are:

  • the building is listed and no EPC is required for the building
  • the amount spent on the works would not be recouped within 7 years - evidence required
  • the works would reduce the value of the property by 5% or more
  • the tenant has refused the landlord entry to carry out the works despite all reasonable efforts to obtain consent (although if the lease is assigned then the Landlord needs to make the request of the new tenant); and 
  • the landlord has recently acquired the freehold - a 6 month exemption will apply
These exemptions need to be registered on the exemptions register before 1 April 2018. Save for (5) above, these exemptions will last for 5 years.
 
For further information contact Maria Hearne on 01223 447445 or click here to email Maria.
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