A guide to the Minimum Energy Efficiency Standards for Commercial Landlords.
The Minimum Energy Efficiency Standard Regulations require all let properties (both commercial and residential) in England and Wales to have a minimum energy efficiency rating. Since 1 April 2018, the regulations have provided that no new lettings of properties with an EPC rating under
“E” are prohibited.
However, from 1 April 2023, the regulations are being widened to include all existing lettings. This means that any Landlord who has a tenanted property with an EPC rating of less than an “E” will be in breach of the regulations and (unless an exemption applies) they will need to take steps to upgrade the energy efficiency of a property to bring it up to an “E” standard or higher. In addition, there are proposed changes to increase the minimum standard further; to “C” in 2027 and “B” in 2030.
Any Landlord continuing to let a Property runs the risk of enforcement action, which includes financial fines and publishing of the Landlord’s details on a public register. In terms of the fines applicable, they are based on the length of the breach. For breaches continuing for 3 months or less, the fine will be between £5,000 and 10% of the rateable value of the property (subject to a maximum of £50,000). If the breach has been subsisting for longer than 3 months, the fine will be between £10,000 and 20% of the rateable value of the property (subject to a maximum of £150,000). The costs to a Landlord of not being abreast of the energy efficiency of their building could therefore be significantly higher than the costs of undertaking works to increase the energy efficiency.
Whilst the regulations affect all lettings, there are certain exemptions which Landlord’s can rely on, provided that they have registered the exemption on the PRS Exemptions Register. The two main exemptions are as follows:-
Consent Exemption:
This exemption will apply in the event that a Landlord has applied but has been unable to obtain consent from a necessary third party (for example a superior landlord or planning authority) or consent has been obtained but it is on terms that a Landlord cannot reasonably be expected to comply with. This exemption will last for 5 years.
Devaluation Exemption:
This exemption will apply if undertaking the works required in order to bring the energy efficiency standard to “E” or above will cause a reduction in value of the property of more than 5%. A valid independent surveyors report will be required to support this exemption. Again, this exemption lasts for 5 years.
There are also temporary exemptions which may apply in certain circumstances and Landlord’s may also be exempt from enforcement action if they have undertaken all possible improvement works to the property have been undertaken but the property remains sub-standard.
In order to mitigate their risk, Landlord’s should consider obtaining new EPCs in respect of their properties, so as to ensure that they meet the minimum standard, or that they have enough time to commence improvement works or claim an exemption.
To speak to our property team contact us today on 01202 338585.
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