In April 2018 changes are being introduced which will affect the landlords of commercial properties.
The Energy Performance Certificate (EPC) rating for commercial properties will have to meet the minimum rating of E; any properties which do not meet this minimum requirement will be deemed unfit to let to new or existing tenants.
James Bailey, managing partner for Bruton Knowles said: “Landlords with large property portfolios should be reviewing their current assets in line with the new MEES regulations now to ensure they are fully compliant by April.”
Property owners can prepare by:
- Checking if their buildings are affected by the changes in MEES
- Making sure all property EPC ratings are up to date
- Checking the dates for lease renewals in line with the new standards
- Updating any contracts to reflect any relevant changes to tenancy rights
Which buildings does MEES apply to?
- Buildings which are not required to have an EPC: such as industrial sites, workshops, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties and holidays lets
- Buildings where the EPC is over 10 years old or where there is no EPC
- Tenancies of less than six months (with no right of renewal)
- Tenancies of over 99 years.
How do I quality for an exemption of EPC rating?
Landlords must register their exemptions to central government through a dedicated PRS Exemptions Register which is expected to go live on April 2018. Any exemptions which are granted will be valid for five years.
The criteria to be granted an exemption are:
- If improvements to the property have been made, or are scheduled to take place, and will pay for themselves through energy savings within seven years.
- If an independent surveyor has deemed the energy efficient improvements could devalue the market value of the property by more than 5%.
- If scheduled works to improve the building’s energy efficiency has been denied by planning authorities or tenants.
Are there any penalties for landlords who don’t comply with MEES?
The penalty will depend on the property’s rateable value and length of lease in breach.
If a property that is in breach of the new MEES regulations is rented out for less than three months, 10% of the property’s rateable value will be charged. (Subject to a minimum of £5,000 and maximum of £50,000)
If the property has been leased for more than three months the penalty increase to 20% of the rateable value. (Subject to a minimum of £10,000 and maximum of £150,000)
Will the changes just affect commercial properties?
These requirements will apply to all private rented properties in England and Wales – even where there has been no change in tenancy arrangements – from 1 April 2020 for domestic properties, and from 1 April 2023 for non-domestic properties.
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