Earlier this year, the Minimum Energy Efficiency Standards (MEES) came into force. This legislation - aimed at improving energy efficiency in the rental sector - means landlords can no longer renew or grant new tenancies unless the property has a minimum Energy Performance Certificate (EPC) rating of E-.
There are penalties for non-compliance, which could see landlords letting homes with EPC ratings of F- or G- fined up to £5,000.
MEES mark a positive step forward for the industry as they will not only make the Private Rented Sector (PRS) more environmentally friendly, they will in many cases contribute towards reducing tenants' energy bills if their homes are made more efficient.
What are the exemptions to MEES?
As with most pieces of legislation, there are several exemptions which allow landlords to delay or forgo compliance. On its website, the Government lists seven exemptions to MEES:
1. 'No funding'
This exemption comes into play if a landlord can't access 'no cost' funding to fully finance recommended energy efficiency improvements.
Applications for this exemption must include supporting evidence from sources such as Green Deal providers. If granted, the exemption will last for five years, after which the landlord must try again to improve the property's EPC rating.
2. ‘7-year payback’
If the expected value of savings (over a seven-year period) from installing energy efficiency improvements is less than the cost of repaying it, then landlords can delay making improvement for five years.
To apply for this exemption, landlords must provide supporting evidence which includes three quotes for the cost of purchasing and installing the improvements in question.
3. ‘All improvements made’
If a landlord has carried out all relevant energy efficiency improvements and their property's EPC rating is still an F- or G, then they could be eligible to apply for this exemption.
The exemption would last for five years and it must be registered on the Exemptions Register before the property can be let on a new tenancy.
4. ‘Wall insulation’
There are certain wall insulation systems that might not be suitable for certain properties. They could, for example, damage the structure of the property.
If this is the case then landlords can apply for an exemption, providing they can supply expert advice from an architect, engineer or building surveyor.
Some energy efficiency improvements such as external wall insulation or the installation of solar panels may require consent from a third party (local authority, mortgage lender, superior landlord).
If a landlord can demonstrate that they have sought consent to make improvements but that it has been rejected, then they could be eligible to apply for this exemption.
If a landlord can prove that energy efficiency improvements which would bring their property's EPC rating up to an E- could devalue their investment by more than 5%, they can apply for an exemption.
They must back up their claim with a report compiled by an independent RICS surveyor that confirms the potential devaluation.
7. ‘New landlord’
If someone becomes a landlord in sudden or unexpected circumstances, they could apply for a six-month exemption from complying with MEES if their property has an EPC rating below E-.
To apply for this exemption, landlords must provide the date on which they became a landlord and a detailed explanation of the circumstances under which they became a 'new' landlord.
All exemptions need to be registered with the central Government PRS Exemptions Register and you can read a more detailed description of each exemption and how to apply for one here.
What energy efficiency improvements have landlords been making?
Following the introduction of MEES, buy-to-let lender Paragon surveyed over 200 landlords to find out the level of awareness of the new regulations and what steps they have taken to comply.
Some 85% of those taking part in the study were aware of the new standards, while the most popular upgrade to improve energy efficiency was replacing the boiler.
This was followed by investing in new windows. Interestingly, just 12% of those taking part said they had invested in loft or cavity wall insulation.
Don’t forget the MEES extension
The energy efficiency regulations currently only apply to new (or renewed) tenancies, but that is all set to change in April 2020.
In under two years, landlords will be required to ensure that all of their properties with existing tenancies have a minimum EPC rating of an E-.
To reinforce that the Government is serious about improving energy efficiency in the PRS, there are also targets to increase the minimum standard to D- by 2025 and C- by 2030.