Minimum Energy Performance Standard Regulations (Non-Domestic) (MEPS) and What The Changes Mean.

7th April 2016

In February 2015 following two consultations published by the UK Government in July 2014, draft legislation has been issued to implement strict energy efficiency regulations for both domestic and non-domestic landlords in a bid to drive the UK property market towards meeting energy efficiency targets.

As of 1 April 2018 all eligible properties within England and Wales in the non-domestic sector, will need to meet a minimum energy efficiency, which is to be equivalent to an Energy Performance Certificate (EPC) rating of E before being let to tenants or sold, except where certain exemptions apply.

Currently, 18% of non-domestic properties are rated within the F & G bands of the EPC rating scale and will require investment and upgrades to meet the new minimum standards.

The only proposed exemptions to the planned new regulations include:

  • Any building which is not required to obtain an EPC as determined by the EPC regulations (e.g. a building which is about to be demolished).
  • Where a property falls below an E EPC rating, the landlord would be required to make improvements as far as is reasonably practicable without incurring unreasonable costs.
  • Where a landlord is denied necessary third party consent to carry out any required improvements, such works would not be required.
  • Where an independent property valuation demonstrates that required improvement works would result in a net material reduction in a property’s value by 5% or more.
  • Non-domestic properties which are owner occupied.

The above exemptions would also have an expiry period, proposed to be 5 years, or earlier where a tenant who previously refused to provide consent vacates the property. After this time, the landlord would be expected to then comply with the standard or demonstrate an exemption in order to be able to let the property.

From the 1st April 2023 Minimum Energy Performance Standards (MEPS) come into effect for all existing leases (including existing lets) or demonstrate a valid exemption such as the refusal of a sitting tenant to consent to improvements.

Local authorities will be given the power of enforcement in the case of non-compliance with MEPS regulations, and the penalty regime is likely to reflect the degree of infringement, and length of non-compliance such that:

  • Providing false or misleading information to the PRS Exemptions register = £5,000 + publication of non-compliance;
  • Failing to comply with a compliance notice = £5,000 + publication of non-compliance;
  • Renting out a non-compliant property for less than 3 months = 10% of rateable value with a minimum penalty of £5,000 and a maximum penalty of £50,000 + publication of non-compliance;
  • Renting out of a non-compliant property for more than 3 months = 20% of rateable value, but with a minimum penalty of £10,000 and a maximum penalty of £150,000 + publication of non-compliance

For the domestic private rented sector, the proposed new regulations empower private domestic tenants to request consent for energy efficiency measures that may not unreasonably be refused by their landlord, from 1st April 2016. In parallel with the non-domestic sector, eligible domestic properties, those within the scope of the Energy Performance of Buildings (England and Wales) Regulations 2012, must also be improved to a minimum E EPC rating standard.

Andy Smith, Principal Technical Consultant for the S2 Partnership said:

“For many years, energy efficiency in buildings has been seen as a way of reducing costs of running a building, but there have been no further consequences for not improving efficiency. Through the introduction of these parameters, the government hopes to give financial incentives for landlords to invest in their properties to improve their efficiency. Although levels of fines are not clear yet, it is heavily insinuated that failure to bring buildings in line with minimum standards will incur a penalty.

“Introducing measures to improve the efficiency of a building can form part of an effective full Environmental Management System which includes the setting of targets, tracking progress against them and then reviewing how to improve performance. This highlights the importance of having robust plans and management systems in place within an organisation, as the introduction of these parameters is a sign that the government is looking to force the hand of investors to ensure that the UK is able to meet wider emissions targets.”

The S2 Partnership is encouraging those who may be affected to follow these top 3 tips to prepare for the changing energy efficiency regulations:

  1. Get an up-to-date EPC which is reflective of the current property performance
  2. Formulate an energy action plan to improve the rating of the property where necessary
  3. Implement these plans and review performance against them for continual improvements

To review the draft legislation, please click here.

The S2 Partnership’s team of specialist environmental consultants work with clients to manage environmental priorities and meet legislative requirements. Working with clients to develop practical solutions and cost-saving opportunities through the use of our risk management platform, RiskWise and environmental audits, our focus is driving continuous improvements by reviewing and applying emerging technologies.

For further information on how the S2 Partnership and RiskWise can help manage your environmental responsibilities or to book a demonstration, please contact our environmental team.