Background
Last year, the government launched an energy performance consultation the purpose of which was to create a proposed framework for tighter minimum energy efficiency standards (MEES) for privately rented non-domestic buildings in England and Wales. The results of that consultation are awaited, but the government confirmed that the long-term goal is for all non-domestic buildings to have an Energy Performance Certificate (EPC) rating of B by 2030. This change will affect around one million buildings.
New and renewal leases are being granted now with terms that will likely stretch over upcoming MEES deadlines. All landlords should therefore be aware of the government’s proposals in order to forward-plan for their property portfolios.
Current rules
Since 1 April 2018, landlords have been prohibited from granting any new leases (which includes renewals and extensions) with an EPC rating below E. However, there are certain limited exemptions within these regulations. Please see our 2018 briefing note for further details.
The next deadline of 1 April 2023 is rapidly approaching, after which a landlord may not continue to let a property with an EPC below E unless a valid exemption is registered. If there is no valid exemption registered for a property, then there is a risk of fines of up to £150,000 and other penalties.
It’s important to note that the MEES regulations do not have any impact on the validity of the letting or the tenant’s rights as against the landlord. A lease which is granted in breach of the regulations is still valid, but the landlord puts itself at risk of enforcement action by doing so.
Proposed phases - key dates for the diary
To ease the transition to the government’s objective of minimum EPC ratings of B by April 2030, the consultation proposed a series of deadlines for non-domestic buildings between 2023 and 2030:
- 1 April 2025 – all privately rented non-domestic buildings that are not exempt must present a valid EPC;
- 1 April 2027 – all privately rented non-domestic buildings must meet a minimum EPC standard of C or have a valid exemption registered;
- 1 April 2028 – landlords of all privately rented non-domestic buildings must check their EPCs to help identify any properties that require further improvements; and
- 1 April 2030 – all privately rented non-domestic buildings must meet a minimum EPC standard of B or have a valid exemption registered.
It should be noted that at the beginning of each compliance window landlords will have to present a valid EPC. Under current proposals, landlords will present the valid EPC to an online PRS Compliance and Exemptions Database, allowing enforcement officials to be aware of which properties are sub-standard and therefore in need of improvement. This is a crucial change given that, as above, landlords will be required to hold a valid EPC at all times after 1 April 2025.
What do you need to do now
To ensure that landlords have the ability to comply with the new regulations, each phase is followed by a two year compliance window to give time for properties to be brought up to standard for the next deadline. Prior to each deadline compliance window, landlords should review their portfolios to identify any ’at risk’ properties and ensure that the property has reached the highest EPC band that a cost-effective package of measures can deliver. This will minimise any risk of enforcement action.
More information
The government’s future trajectory implementation.
Hannah Bristow