Social Housing Speed Read – Recap: Energy Performance Certificates

Whilst the MEES Regulations have been in force for some time, given the financial penalties available, it is imperative that landlords, particularly those operating in the private rental market, understand and comply with their obligations.

The MEES Regulations

The MEES Regulations apply if:

• the property is regarded as sub-standard (i.e. it has an EPC rating of ‘F’ or ‘G’);
• the property is a domestic private rented property (i.e. the property is let under a ‘qualifying’ tenancy);
• the property is required to have an EPC;
• the landlord is letting the property on or after 1 April 2018 or is continuing to let the property on or after 1 April 2020;
• the landlord has not made energy efficiency improvements to the property so that it is no longer regarded as sub-standard; and
• the landlord cannot rely on an exemption.

Qualifying tenancies include (amongst others) assured tenancies under the Housing Act 1988 (including assured shorthold tenancies) and regulated tenancies under the Rent Act 1977. The MEES Regulations do not apply to secure tenancies under the Housing Act 1985.

Sub-standard property

A landlord of sub-standard domestic private rented property must not grant a new tenancy of the property, on or after 1 April 2018, or continue to let the property, on or after 1 April 2020, unless:

• the landlord has made energy efficiency improvements so that the property is no longer sub-standard; or
• the landlord has a ‘legitimate reason’ not to improve the property and this reason has been registered on the PRS Exemptions Register. For example:
  • if all relevant energy efficiency improvements have been made and the property remains sub-standard;
  • there are not any improvements that can be made;
  • the landlord needs consent (either from the tenant or a third party) to carry out the works and consent is refused; or
  • making the relevant improvements would reduce the market value of the property by more than 5%.

If a property has an EPC rating of ‘E’ of higher, the property will not be regarded as sub-standard. It is likely that the ‘E’ benchmark will be reviewed upwards in the coming years.

Excluded properties and registered providers

Low rental accommodation (i.e. accommodation which is provided by a private registered provider of social housing and is offered at a rent which is deemed to be below the market rent) is not subject to the MEES Regulations.

Most of the properties let by registered providers will not fall within the scope of the MEES Regulations; however properties let at market rent whether directly or through a subsidiary or a group company will be subject to the MEES Regulations.

Regardless of whether the MEES Regulations apply, there are several benefits in improving the energy efficiency ratings of rented accommodation. Research found that improving the energy efficiency of a property may in turn, reduce rental arrears. Further, homes which are more efficient are typically void for shorter periods of time than those which are less efficient.

Enforcement

A landlord who grants a tenancy or alternatively, continues to let a property in breach of the MEES Regulations may be subject to enforcement action. It is noted however, that the lease itself will remain valid and enforceable.

The following financial penalties may be imposed:

• penalty for breach of the letting restrictions (up to a maximum of £4,000);
• penalty for registering false or misleading information on the PRS Exemptions Register (of up to a maximum of £1,000); and
• penalty for failure to comply with a compliance notice (up to a maximum of £2,000).

If more than one penalty is payable, the enforcement authority can choose to impose all three penalties.

Footnote: s21

It would be remiss to mention EPCs and not remind of the obligation to provide a copy to tenants at the start of an assured shorthold tenancy, along with a Gas Safety Certificate, if appropriate. Failure to do so will prevent a landlord from relying on section 21 Housing Act 1988 as a ground for possession, should that be required.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.