Exemptions: don’t make a MEEStake

We have previously reported on new minimum energy efficiency standards (MEES) when letting domestic and commercial premises in England and Wales.

Since April 1, 2018 a landlord cannot grant a lease or tenancy of a sub-standard property. A “sub-standard” property is a property that does not achieve an “E” Energy Efficiency Certificate (EPC) rating or higher. There are a number of exemptions, but a landlord can only rely on an exemption by registering it with supporting documentary evidence in a public Private Rented Sector (PRS) Exemptions Register.

The government has recently published guidance on available exemptions and PRS Exemptions Register evidence requirements. The exemptions covered by the guidance are

• The “no funding” exemption – this applies where an improvement to bring a property to the required standard need not be implemented because it cannot be wholly financed at no cost to the landlord (for example through a local authority grant). This exemption applies to domestic property only.
• The “seven year payback” exemption – available where a recommended improvement need not be carried out because the cost would be more than the savings on energy bills over a period of seven years. This exemption applies to non-domestic property only.
• The “all improvements made” exemption – applies where all relevant energy efficiency improvements to the property have been made (or there are none that can be made) and the property remains sub-standard.
• The “wall installation” exemption – applies where recommended wall installation would have a potential negative impact on the fabric or structure of the property.
• The “consent” exemption – available where a third party consent (such as a planning, superior landlord or mortgagee consent) is required before energy efficiency improvements can be carried out but that consent cannot be obtained.
• The “devaluation” exemption – applies where the required energy efficiency measures would reduce the market value of the property by more than five per cent.
• The “new landlord” exemption – a six month exemption is available to new landlords in certain circumstances, for example where a new business lease is granted under the Landlord and Tenant Act 1954.

Most of the exemptions last for five years. After expiry, the landlord must try again to improve the property’s EPC rating but if this cannot be achieved, a further exemption may be registered.

Prospective landlords should note that

• An exemption must be registered before they grant the lease or tenancy to which it relates.
• Exemptions are personal and cannot be transferred to an incoming landlord on a sale of a tenanted property. The incoming landlord must either carry out the necessary improvements or apply for its own exemption, if the property is to continue to be let.