What Landlords Need to Know About Minimum Energy Efficiency Standards

The Minimum Level of Energy Efficiency standards (EPC band E) for domestic private rented properties was introduced in 2018 as part of the Domestic Minimum Energy Efficiency Standard (MEES) Regulations. The MEES regulations are still rolling out, so here we’re going to tell you everything you need to know ahead of the April 2019 deadline.

According to government guidance:

The Regulations apply to all domestic private rented properties that are:

• let on specific types of tenancy agreement
• legally required to have an Energy Performance Certificate (EPC)

Landlords whose properties have an EPC rating of F and below are affected.

• For existing tenancies, landlords have until April 2020, i.e. this year, to improve the property so that it reaches a minimum EPC rating of E.
• For tenancies renewed after April 2018, the same applies.
• For tenancies that started after April 2018, landlords had to carry out remedial work with immediate effect.

What are Current MEES Guidelines?

The April 1 deadline isn’t too far away. If you have yet to carry out remedial work or register an exemption, you need to get moving. Otherwise, you could be looking at a nasty penalty. Hopefully, you are already aware of the MEES regulations and how they relate to landlords, but just in case, here’s a rundown of what you need to know before April 1.

Does MEES Affect me?

Those of you with tenancies that pre-date April 2018 have until this April to meet MEES in your properties. The same applies to landlords with tenancies that were renewed after April 2018. New landlords also need to check how the MEES guidelines affect them.

How do I pay for Energy Efficiency Improvements?

Unless you can find grants to help fund the cost of energy efficiency improvements, the cost of the work must come out of your pocket. It’s not all doom and gloom, however, as there is a cost cap in place.

Landlords don’t have to spend more than £3,500 (including VAT) on energy efficiency improvements, even if that is not enough to raise a property’s EPC to band E. If you are eligible for a grant from the local authority (or any other organisation), the difference between the grant and the £3,500 cap is payable by you.

There has been mention of an increase in the cost cap. In July last year, the Business, Energy and Industrial Strategy Committee proposed an increase to £5,000, which the RLA described as “disappointing” given there would be no additional support from the government to assist cash-strapped landlords.

The RLA also called for extra tax incentives to encourage landlords to invest in their properties. Currently, landlords can’t make a deduction for energy efficiency improvements, as the Energy Saving Allowance was scrapped in 2007. However, we live in hope that the government sees the light and offers new tax breaks to make energy efficiency a more attractive proposition for landlords. 

Are There any MEES Exemptions?

It’s worth checking to see if any of your properties are exempt. If they are, it will save you some money.

Empty properties are exempt. Landlords don’t need to carry out energy efficiency improvements unless they take on a new tenant. If the property still doesn’t reach the minimum EPC band E, despite improvement works being carried out up to the cost cap, landlords can register an exemption. However, a copy of the EPC or surveyor’s report must be produced. Details of any energy efficiency improvements must also be provided.

If the cost of any energy efficiency work is prohibitive and will exceed the cost cap, landlords can apply for a high-cost exemption. This might be applicable if your property is in a remote, inaccessible location, such as a Scottish Island, or it’s a very old property.

Older properties may qualify for an exemption if the only possible improvement that can be made is wall insulation and this would cause damage to the fabric of the building. Note that wall insulation is not recommended on some older properties because it can cause serious damp issues. If this applies to your property, you will need to provide proof, such as a copy of an expert’s report.

If you need permission from a third-party before improvements can be carried out, you may be eligible for an exemption if permission cannot be obtained. However, this doesn’t mean you can claim your tenant refused to allow improvement works to be carried out.

In most cases, making energy efficiency improvements will increase the value of a property – and make it easier to let and sell. But, if making energy efficiency improvements will devalue the property by more than 5% (and you have proof in the form of a report from an RICS valuer), you can apply for an exemption. This one might be applicable if the property is a listed or historic building (who wants to see solar panels on a thatched roof!).

New landlords can register for a temporary exemption, which will give them time to carry out improvement works.

How Long do MEES Exemptions Last?

Exemptions last for five years. When they expire, you must have carried out appropriate energy efficiency improvements or you’ll need to reapply for a new exemption if improvement work up to band E is still not possible. 

New landlord exemptions last for six months. After this, you can apply for a different type of exemption. Otherwise, you must make improvements to ensure the property now meets band E requirements.

How to Register a MEES Exemption

You can register your property as exempt on the government website. You will need to create an account if you haven’t already registered.

You will need to have the property’s address and a copy of the EPC to hand. You’ll also need to know in advance which exemption you want to register for. You may need to provide additional information, including copies of relevant reports and details of works carried out. Be aware that any experts you employ, such as surveyors, must be on the official register. So, you won’t get away with photoshopping a bogus report stating your dingy two-bed terrace is a listed heritage building of national architectural importance.

How to Improve Energy Efficiency in Properties

The government has published a list of energy efficiency measures landlords can take to raise their property’s EPC rating, along with an indicative cost and the potential savings that can be made.

Simple measures like draught-proofing and adding more insulation in the roof space are relatively inexpensive – and if you do the work yourself, not too onerous. Others, such as replacing single-glazed windows with UPVC windows are much more expensive and likely to cost a lot more than £3,500.

The government’s list covers most options. It’s wise to check your EPC report to see what improvements are recommended. Whilst you can make any improvements you like; you should start with those recommended on your EPC report.  If you go off-piste and the work you do fails to raise the property’s EPC rating to band E, you won’t be able to let it or register for an exemption.

Go through the surveyor’s recommendations. If money is an issue, your best bet is to start with the smaller items like switching lights over to LEDs and boosting the insulation in the attic if it falls short of the minimum recommended amount. However, other measures, like replacing old windows, are worth doing if you can afford it.

Not only will new energy-efficient windows make the property a lot nicer to live in for your tenants but they will also increase the value of the property, make it more attractive to future tenants and buyers, and reduce the cost of contents insurance.

Whatever energy-saving measures you decide to invest in, shop around for the best prices. Look for local suppliers who can offer you a good deal. The more properties you are improving, the easier it will be to negotiate a decent discount. Remember, national companies tend to charge more because their overheads are greater. Local window fitters, for example, use the same products but their fitting costs are up to 50% lower.

What Happens if I Ignore MEES?

Letting agents are required to have an EPC for properties they manage, so a reputable agent won’t take on a property if it doesn’t reach band E. This won’t be an issue if you market your own properties, but tenants can check the EPC rating by visiting the public EPC register.  Local authorities can also check for non-compliance when a property has been let to a new tenant or an exemption has been registered. If you let your property in breach of the guidelines, you will be served with a non-compliance notice.

The penalties for non-compliance are dependent on how long the property has been in breach of the MEES guidelines and how serious the non-compliance is. However, the maximum you can be fined per property is £5,000.

If you believe a penalty notice was given in error, you can appeal.

Final Word on MEES

April 1 is not too far away, so don’t stick your head in the sand. If you haven’t already done so, act now to get your properties in order.

We hope this guide has given you a useful overview of the MEES regulations. You can find more links and resources on MEES here. If you want more detail on the MEES guidelines and what landlords need to know There are links on there to further information on EPCs, exemptions, and more.