UK landlords must abide by this new law within the next 12 months
There's less than 12 months to go until the new Minimum Energy Efficiency Standards (MEES) come into effect. Do you know what that means when it comes to compliance? We asked Adam Kingswood, head of Kingswood Residential Investment Management to explain.
Adam says that the changes, which come into force from April 1, 2018, mean that it will be unlawful to let or lease a residential or commercial property with a poor energy rating.
The clock is ticking and depending on the volume of work necessary to meet compliance with the regulations, it's something that landlords should be addressing now.
Failure to do so could have adverse legal and financial consequences, as after the April deadline properties that do not meet the minimum standards cannot be re-let until improvements are made. If owners re-let the property, they could face a penalty fine of up to £5,000 for domestic properties and £150,000 for non-domestic properties.
He said: "With less than 12 months to go until the new legislation comes into place it is important that landlords put plans in place to ensure that their properties meet the required standards. We have noticed interest from our clients regarding this now it is less than 12 months away and we are busy advising them on the necessary steps to take to ensure they are compliant."
Why are MEES necessary?
The built environment has been identified by the government as a leading contributor to Greenhouse Gas (GHG) emissions. Therefore, it must act to reduce GHC so it can meet its carbon reduction targets for 2020 and 2050.
The government estimates that 18% of commercial properties hold the lowest EPC ratings of F or G. Building Regulations are in place to ensure that new properties meet current energy efficiency standards and MEES is targeting the UK's older buildings.
What is the requirement?
Introduced with the aim of improving the energy efficiency of private rented properties, MEES requires all buildings, both domestic and non-domestic, in England or Wales to achieve at least an 'E' rating on their Energy Performance Certificate (EPC) before they can be leased or rented.
The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. It's important to note that the minimum requirement may be raised in the future.
Adam adds: "Landlords whose properties currently fail to meet this minimum standard must undertake an energy efficiency programme of works to ensure compliance.
"Landlords should review their EPCs now, as even properties that currently have an EPC rating of 'E' may be at risk from the regulations as the standard for achieving an 'E' grade has changed since EPCs were first introduced. In some cases, the EPC may just need updating if improvement works have already been carried out but the EPC wasn't updated since the initial certificate."
The implications of MEES
Adam continues: "Landlords who have not yet taken stock of the implications of MEES for their property portfolio should be doing so now as a matter of urgency. Factors such as the future marketability of properties falling below the threshold and the impact on re-letting will need to be balanced against the costs of the required improvements.
"Landlords should undertake a thorough review of the energy efficiency of their properties and assess their position."
Planning for action
Putting into place an action plan to lift the EPC rating of at risk properties by making strategic and well-targeted improvements, may help landlords to reduce the cost implications of achieving compliance.
Adam advises that the first step is to verify the accuracy of any existing EPC report. EPCs may well have been rated incorrectly due to flawed assumptions made by the software or improvement works that will improve the EPC rating may have been carried out without the certificate being renewed.
"With time flying by before the introduction of MEES in April 2018, having a well formulated energy action plan in place and working through it now, may help to give landlords peace of mind knowing that their properties are compliant or that steps are in hand to address the issues," he added.
"Whatever the scale of the work required, be it loft insulation, hot water controls or replacement glazing, checking on the lease to identify where responsibility for the work lies and finding out what incentives and potential sources of support to fund energy efficient improvements are available is always worth the effort."
Energy efficient homes, a win win for landlords and tenants?
"Energy efficient homes are cheaper to heat and more attractive to tenants and buyers so good insulation and sufficient affordable heating will mean tenants are happier and more likely to stay.
"Maintenance costs are higher in cold homes, with un-insulated walls, where damp and condensation can cause mould growth and damage to the building structure, particularly walls and window frames. Making the energy efficiency steps required by MEES may seem like a headache now, but future proofing properties now is a worthwhile investment."