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In early 2018 the Minimum Energy Efficiency Standard (MEES) Regulations were introduced for commercial premises. ACI Reports provide an update on activity at July 2018, and market affects

Jul 10, 2018 By ACI Reports | Category: EPBD

The MEES Regulations were introduced on 1 April 2018 with the stated aim of encouraging landlords and property owners to improve the energy efficiency of their properties. They are an extension to the regulatory system imposed in 2008 which introduced Energy Performance Certificates (EPCs) for commercial property. It is now unlawful to let commercial premises which have an EPC rating of F or G.

If a building is exempt from requiring an EPC then the MEES Regulations will not apply.

As well as the exemptions from EPCs there are also a number of exemptions to the MEES Regulations, including listed buildings and temporary structures.

However, in order to claim the exemption, the landlord must:

Register the exemption on the Private Rented Sector (PRS) Exemptions Register; and provide supporting evidence that the exemption applies to the premises.

New guidance on the exemptions and the evidence required was published by the Department for Business, Energy & Industrial Strategy on 22 May 2018.

Compliance with the MEES Regulations is enforced by the local authority which has powers to impose civil penalties based upon the property’s rateable value. The minimum fine is £5,000 and the maximum is £150,000. There is also a fine of £5,000 and publication on to a ‘naming and shaming’ register for any landlord providing false or misleading information.

So, what have we learnt so far?

This extra regulatory burden has hit hard with some landlords. The cost of auditing properties and managing additional regulations has been high and it has also left some landlords unable to re-let premises that were market-ready. Tenants are also affected. Some have been left with uncertainty as landlords rush to undertake works to ensure their properties comply. ACI Reports “test” EPCs to ensure that the highest grade is achieved within the Regulations, Landlords should beware of cheap and cheerful EPC providers who use defaults in the software, leading to poor grades – this can lead to considerable unnecessary cost.

There are also a number of practical difficulties to overcome.

Listed Buildings

For the past 5 years, listed buildings have been exempt from the need to obtain an EPC and are therefore not subject to the MEES Regulations. However, this EPC exemption is qualified ‘insofar as compliance with minimum energy performance requirements would unacceptably alter the building’s character or appearance’.

So how do you prove that the requirements would unacceptably alter the building’s character or appearance? One solution is to obtain an EPC for the building showing the local authority what works are required. If such works would unacceptably alter the building’s character or appearance then as well as proving that the building is exempt from MEES, paradoxically, you are also proving that the building does not need an EPC.

Alternatively, you could try to speak with the local authority conservation officer to see whether they require you to obtain an EPC for your listed building. However, this may prove more troublesome than obtaining an EPC in the first place.

Dilapidations

At the end of a lease a landlord may need to carry out significant works to ensure a property is MEES compliant before it can be re-let. Usually the cost of refurbishment works will be covered (at least in part) by the exiting tenant. However, this may not be the case with works required to comply with MEES. Not only might the work itself be beyond an existing tenant’s repairing obligation, if substantial refurbishment works are required then such works may supersede any dilapidations claim.

One solution is to try and deal with some items before lease end in conjunction with the tenant but this can be difficult to achieve.
The future

There is still a lot to learn about the impact of MEES as the market adapts to yet more regulation. Market leaders were well prepared to claim the benefit of exemptions and deal proactively with properties, including planned work carried out in consultation with tenants through the service charge mechanism (where possible). Some landlords and tenants are only just catching up and the next year will be an interesting time as the first fines begin to hit and the market settles as to what is expected from both landlords and tenants. The first item to consider is the grade of the EPC. Always ask a qualified expert about this, here at ACI Reports, we advise some of the UKs largest Landlords on strategy and how to deal with the Regulation at minimal cost.

July 2018
ACI Reports Ltd
www.acireports.co.uk

Energy Performance of Buildings, EPBD>

 
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