Part 3 of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015/962) (MEES Regulations) require a minimum energy efficiency standard (MEES) to be met before properties can be let in certain circumstances. MEES applies to both residential and commercial properties.
From 1 April 2023 the rules tightened to prevent not only the grant of a new lease of a property that doesn’t have a minimum EPC rating of E, but also to prevent the continuation of any lease of a property without a minimum E rating. Under current government proposals, in 2025 this will be upgraded to a requirement for the rating to be C or higher for any new lettings, and in 2028 it will also apply to any continuing tenancies. The minimum rating is expected to become B by 2030.
If a lease is granted in breach of MEES, it does not invalidate the lease but leaves the landlord liable to possible enforcement action.
MEES imposes the liability for improvements to achieve the minimum energy efficiency ratings on the landlord but there are circumstances in which the tenant may be held liable for the costs depending upon the terms of the lease. It is therefore important for the parties to a lease to carefully consider drafting to have awareness of where the liability will fall.
Most leases contain a clause requiring that the tenant complies with all laws affecting a property however MEES specifically applies to the grant or continued grant of a lease by the landlord, as opposed to making compliance the responsibility of the property owner/occupier so it is doubtful that a tenant will be responsible for undertaking or meeting the cost of energy efficiency improvements under this clause.
A tenant may have liability for the cost of energy efficiency improvements however, where it grants a sublease, in which case it acts as landlord; where it has a liability under service charge or where a lease contains a specific clause requiring the tenant to pay the costs of any improvements necessary to improve energy efficiency or to comply with MEES.
In some circumstances the cost of compliance with MEES will be significant and as the minimum ratings are tightened more leased properties will be caught by the regulations so it is important for landlords and tenants to address this in new leases and to review existing leases to identify where liability falls.
If you’re looking for a solicitor to draft a commercial lease or advise on a dispute involving your current lease, Farleys’ commercial property experts can help. Give us a call on 0845 287 0939, contact us by email, or use the online chat below.