For anyone who is a landlord in London, there is pressure to ensure that their properties are rented out and that they are maintaining sufficient rental income to make continuing as a landlord profitable. If rental income reduces too much, landlords can begin to experience serious financial difficulties.
At a time when rents for London properties are not rising as much as they are in the rest of the country, it’s important for London landlords to optimise income as much as possible and to avoid any financial pitfalls. One of these pitfalls comes in the form of penalties for non-compliance with the Minimum Energy Efficiency Standards (MEES) which were introduced in April 2018.
What are the Minimum Energy Efficiency Standards (MEES)?
MEES were introduced so that landlords in London, and throughout the UK, would know what was expected of them from an energy efficiency point of view. Once these standards were introduced it became illegal for any landlord of commercially let property to provide a long term (more than six months) lease on a property that has an EPC rating of F or G. These are the lowest EPC ratings possible for a property.
Currently, the standards apply for new tenancies and changes of tenancy. However they will apply to all tenancies from 1 April 2020 for domestic properties, and from 1 April 2023 for non-domestic properties.
Why were the MEES introduced?
The biggest reason for the introduction of the MEES was the fact that the UK government needs to meet energy efficiency targets. So far, it has met its initial targets but may struggle to meet further targets. Dealing with inefficient energy use in housing is a major factor in meeting these targets. Add to this the fact that the government aims to reduce CO2 emissions from buildings to as close to zero as possible, by 2050, and the introduction of the MEES makes sense.
London landlords may see compliance as a financial imposition at a time when rental income is an issue. However, paying attention to the energy efficiency of a property makes it easier to attract renters who are willing to pay a reasonable amount of rent, because they know they should end up spending less on energy bills. This means that investing in improvements which lead to MEES compliance is worthwhile.
Checking the EPC rating of a rental property
Complying with the MEES means that London landlords need to know the EPC rating for their properties. If ratings for any property are F or G they need to be improved. Once improvements have been made, it’s necessary to have the property re-assessed so that the improvement in ratings can be verified.
Any responsible landlord in London will make sure that they are compliant with the MEES. However, it’s still useful to know what penalties could be faced by any landlords who are found to be non-compliant.
Potential penalties for non-compliance with the MEES
from the fact that renting out a property that has a low EPC rating, for a
decent rent, is difficult there is also the matter of penalties for
non-compliance. The maximum penalty for any one offence is £5,000. This is split
in different ways:
- £2,000 fine for non-compliance of up to 3 months.
- £4,000 fine for non-compliance that lasts longer than 3 months.
- £1,000 fine for providing incorrect or misleading information that is required by the PRS exemption register and £2,000 fine for failure to comply with any ensuing compliance notices.
All of these fines are significant so any landlord in London, or across the country should make sure they are compliant, if they want to optimise revenue from renting out their property.
It’s obvious that landlords in London need to make the most of their rental income opportunities, if they want to continue operating as a landlord. Meeting energy standards is an important part of this as failure to comply with the MEES can be costly. Of course, meeting energy standards also makes it easier for a landlord to secure a good rent for a property.
Domestic property tenants like the idea of living in an energy efficient property as energy costs are reduced and commercial property tenants know that efficient use of energy is important, from a budgetary and reputational point of view. Meeting energy standards is essential for all London landlords, from every point of view.