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If the borrower is a landlord, MEES will impact on the lender. The value of the property will be reduced if it is not up to the required standard and cannot be lawfully let. This will also remove the borrower landlord’s income and make it more likely that they will default on loan repayments. The lender will also be directly affected if the borrower landlord defaults on their loan and the lender takes possession of the property.
The landlord 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. As it is now unlawful to both grant new tenancies of sub-standard properties, and continue to let them, any lettings of sub-standard properties are already susceptible to penalty notices. Swift action is, therefore, imperative as fines increase with the passage of time.
Works which come within the definition of ‘relevant energy efficiency improvement’ must be carried out. That means that:
No, the legislation does not give an automatic right of entry to landlords to carry out energy improvement works. Whether or not a landlord has such a right will depend on the drafting of the lease. Where there is no such right, the tenant’s consent will need to be obtained. If the tenant will not give consent, the landlord may be able to register a ‘consent exemption’.
The landlord can 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.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2023. Specific advice should be sought for specific cases. For more information see our terms & conditions.
Alexandra Holsgrove Jones
06 April 2023