Minimum Energy Efficiency Standards: The E Rating for New Lettings

by | Apr 3, 2018 | Dilapidations, Regulation and Compliance

If you let commercial or residential property, an Energy Performance Certificate is no longer just paperwork. Since 1 April 2018, under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, a landlord cannot grant a new tenancy, or extend or renew an existing one, where the property has an EPC rating of F or G, unless a valid exemption has been registered.

The timetable

  • From 1 April 2018: the standard applies to new lettings, renewals and extensions.
  • From 1 April 2020: it applies to all domestic private tenancies, including those already running.
  • From 1 April 2023: it applies to all non domestic private lettings, even with no change of tenant.

The regulations cover properties that are required to have an EPC. Very short lettings and very long leases are excluded.

Exemptions

Exemptions exist, but they must be registered on the government’s exemptions register to take effect, and most last five years. For non domestic property they include cases where all relevant improvements have been made, where improvements would not pay for themselves within seven years, where a necessary consent has been refused, and where the works would reduce the value of the property by more than five per cent. Each needs evidence.

What landlords should do

  1. Check every EPC across the portfolio now, and note when each one expires.
  2. Identify the F and G properties and find out what would bring them to E. Lighting, heating controls and insulation are often the starting point.
  3. Time the works. A vacant unit between lettings is the easiest time to improve it.
  4. Review lease terms on alterations, access for works and who may commission an EPC.

The link with dilapidations

MEES changes the conversation at lease end. A landlord who plans energy improvements after the tenant leaves may find that some repairs claimed in a dilapidations schedule would be superseded, which can affect the loss the landlord can actually recover. Tenants’ alterations can also change the rating, for better or worse. Both sides should take the standard into account when schedules are prepared and negotiated.

The RICS guidance on dilapidations covers how claims are assessed. Our Building Surveys and Dilapidations services help landlords and tenants plan ahead. See how we handled a £357,000 dilapidations claim on offices.