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Landlords of non-domestic properties with EPC ratings of below E now have less than six months to improve the EPC rating or register an exemption. Failure to take either route, could result in a fine of up to £150,000 plus ‘naming and shaming’.
From 1 April 2023, it will be unlawful for a landlord to ‘continue to let’ a sub-standard property, unless an exemption applies and has been validly registered on the PRS Exemptions Register.
Currently a ‘sub-standard property’ is a property with an EPC rating of below E, but that is set to change, with the minimum rating likely to be raised to C in 2027 and B in 2030. See our legal insight for more information.
You will either need to carry out energy improvement works, to bring the EPC rating up to at least an E rating, or register an exemption.
You must carry out works which come within the definition of ‘relevant energy efficiency improvement’. That means that:
To be ‘relevant energy efficiency improvements’ they must also satisfy the 7 year payback test.
If you carry out all relevant energy efficiency improvements, and the property is still rated below E, you can continue to let it provided that you have registered an exemption on the PRS Exemptions Register.
No, the legislation does not give an automatic right of entry to landlords to carry out energy improvement works. Whether or not you have such a right will depend on the drafting of the lease. Where there is no such right, you will need to get the tenant’s consent. If the tenant will not give consent, you may be able to register a ‘consent exemption’.
From 1 April 2023, you will be able to register a temporary exemption. This exemption lasts for six months, and is designed to enable the purchaser to get the property up to the required standard, or register a longer-term exemption.
The temporary exemptions last for six months. Other exemptions will generally last for five years. However:
It is likely that standards will rise. We are awaiting a response to the 2021 consultation, which proposed raising the minimum standard for non-domestic properties to C in 2027, followed by B in 2030. It is also possible that in-use energy ratings will become mandatory for some properties.
TLT has extensive experience in advising on the implications of the MEES Regulations. If you would like to discuss, please get in touch.
Alexandra Holsgrove Jones
01 November 2022
Partner, Head of Future energy & Real estate Bristol
Senior Knowledge Lawyer Bristol