In an era where sustainability and energy efficiency take centre stage, landlords in the UK are now required to have a thorough understanding of Minimum Energy Efficiency Standards (MEES). Currently, around 3.2 million privately rented properties in England and Wales have an EPC rating of D or below, with PRS properties being among the least energy efficient in the domestic housing stock, costing over £6bn in energy bills and producing roughly 11 megatonnes of carbon dioxide per year. The government has enforced MEES regulations in an attempt to upgrade as many properties to an EPC rating of C or above by 2030. In this blog, we explore why a property may be exempt from MEES Regulations, how to apply for an exemption certificate and the repercussions of non-compliance.
Understanding MEES Regulations
In the UK, a property must have a minimum EPC rating of E before it can be let to a tenant. The MEES regulations, which were introduced in 2018, set a crucial benchmark for the energy performance of rental properties, and encourage landlords to invest in energy-saving solutions such as insulation and low-carbon heating to help reduce energy consumption and costs, saving both the landlord and tenant money.
However, if the property has an F or G rating, and the landlord believes the property can’t be improved to meet the minimum E rating, they can apply for an exemption through the government. In total, there are 7 valid reasons for exemptions:
Cost – Applies to Domestic Property
If the necessary improvements to meet the “E” rating are likely to cost more than £3,500, a landlord might be exempt. To support this exemption, the landlord is required to upload copies of 3 quotes from different installers, each showing that the cost of purchasing and installing the cheapest recommended improvement exceeds £3,500 (inc. VAT). Once sought, the exemption will be valid for 5 years; after which time the exemption will expire and the landlord must try again to improve the property’s EPC rating to meet the minimum level of energy efficiency. If this still cannot be achieved, a further exemption may be registered.
7 Year Payback – Applies to Non-Domestic Property
Landlords are usually required to ensure their non-domestic properties have an energy efficiency rating of at least E. However, if a landlord can prove that the expenses for buying and installing a recommended energy improvement won’t be recouped within seven years through energy bill savings, they are exempt from this rule. If the energy savings over those seven years don’t outweigh the installation cost, the property can still be let even if it falls below the E rating. Much like the previous exemption, landlords must gather evidence and quotes to prove their exemption, which also lasts a period of 5 years.
All Improvements Made – Applies to Domestic and Non-Domestic Property
The requirement to meet the minimum level of energy efficiency doesn’t apply if the landlord has made all the relevant energy efficiency improvements that can be made to the property (or there are none that can be made), and the property remains below the EPC E rating. If this is the case, the landlord must register the circumstances on the PRS Exemptions Register before the property can be let on a new tenancy. This exemption will also last 5 years, by which time the landlord must try again to make improvements. If this is not possible, another exemption can be sought.
Wall Insulation – Applies to Domestic and Non-Domestic Property
MEES Regulations recognise that certain wall insulation systems may not be suitable in some situations, even if they are recommended and meet funding requirements (which differ for domestic and non-domestic properties). To address this, there’s a provision for when cavity wall insulation, external wall insulation systems, and internal wall insulation systems should not be installed. This provision states that a recommended energy efficiency measure is not considered relevant if it involves these wall insulation types and the landlord has obtained written expert advice stating that it’s not suitable due to potential negative impacts on the property’s fabric or structure.
When contemplating an exemption, a landlord should seek advice from specific experts, such as a registered architect, chartered engineer, chartered building surveyor, or chartered architectural technologist. When registering this exemption, landlords need to upload the written opinion of the relevant expert stating why the property can’t be improved to an EPC E rating due to the negative impact of the recommended wall insulation measure. Again, the exemption lasts for 5 years, after which landlords must attempt to improve the property’s EPC rating or register another exemption if improvements aren’t possible.
Consent – Applies to Domestic and Non-Domestic Property
Depending on circumstances, certain energy efficiency improvements may legally require third-party consent before they can be installed in a property. Some improvements may include (but are not limited to) external wall insulation or solar panels (which can require local authority planning consent), consent from mortgage lenders, or other third parties. Consent from a superior landlord may also be required where the landlord is a tenant or may need to be approved by the current tenant of the property.
When registering an exemption of this type, the landlord will need to upload a copy of any correspondence and/or relevant documentation demonstrating that consent for a relevant energy efficiency measure was required and sought and that this consent was refused. The exemption lasts for 5 years, after which the landlord must again try to make improvements. In instances where improvements couldn’t be made because consent could not be obtained from the current tenant, the exemption will only remain valid for as long as that tenant remains the tenant. After which, the energy improvements would need to be made before the property could be let out to a new tenant.
Devaluation – Applies to Domestic and Non-Domestic Property
An exemption from meeting the minimum E EPC rating may apply if the suggested works negatively affect the value of the property. In this case, a landlord must obtain a report from an independent surveyor who is on the Royal Institution of Chartered Surveyors (RICS) register of valuers that highlights how the installation of specific energy efficiency measures would reduce the market value of the property, or the building it forms part of, by more than five per cent.
A surveyor’s report will need to be prepared to support this exemption and must clearly state which recommended energy efficiency measures for the property would lead to it being devalued. Any suggested improvements must be made regardless if they are not covered in said report. This exemption lasts for 5 years, after which the landlord must try to make energy improvements. If not achievable, another exemption must be registered.
New Landlord – Applies to Domestic and Non-Domestic Property
There are certain situations where a person might suddenly become a landlord, making it inappropriate to immediately comply with these regulations. In such cases, a temporary exemption of 6 months from the date of becoming the landlord will be granted for the prohibition on letting a substandard property. These circumstances include:
- Granting a lease due to a contractual obligation, regardless of when the contract was entered into.
- Becoming a landlord when taking over the lease due to the tenant’s insolvency, where the landlord has been the tenant’s guarantor.
- Being a guarantor or former tenant who has exercised the right to obtain an overriding lease under the Landlord and Tenant (Covenants) Act 1995.
- Creation of a new lease by operation of law.
- Granting a new lease under Part 2 of the Landlord and Tenant Act 1954.
- Granting a new lease by court order, excluding Part 2 of the Landlord and Tenant Act 1954.
When applying for the exemption, a landlord must provide the date in which they became the landlord of the property, and a written explanation detailing the circumstances in which they became the landlord.
The council is responsible for making sure that properties meet the Minimum Energy Efficiency Standards (MEES) Regulations, however, it’s the landlord’s job to ensure their property complies with these standards. If a private sector landlord continues to rent out a property with an EPC rating of F or G, the council can issue a Compliance Notice and a Penalty Notice to the landlord, with a maximum penalty of £5000.
Furthermore, under the Housing Act 2004, Local Authorities have the power to enforce minimum Housing Standards in the private rented sector using the Housing Health and Safety Rating System (HHSRS). It’s important to note that EPC ratings on their own aren’t sufficient reasons to let a property. Even if a property meets the minimum EPC rating of E, landlords also have a duty to provide sufficient heating and thermal comfort for the occupant/s. Local Authorities can take legal action or impose penalties of up to £30,000 if hazards, including issues related to cold temperatures, are identified in a property and not addressed.
Get in touch
At CWC Solicitors, we’re committed to helping you navigate the MEES Regulations, ensuring you make informed choices as a landlord and continue to comply with all the appropriate rules. If you have questions or need advice regarding your exemption applications, don’t hesitate to reach out to our expert team.