Expiry dates of MEES exemptions in commercial property
Landlords beware! You will no doubt remember that from 1st April 2018 the MEES Regulations came into force, making it unlawful for landlords to grant any new lease or renewal of a property that is deemed “sub-standard” under the MEES Regulations (i.e. where the EPC rating falls below ‘E’). From the 1st of April 2023, it is now unlawful to continue to lease out any non-domestic property which falls below this standard rating - unless you have registered an exemption.
If an exception in the MEES Regulations applies, and you have registered it in the PRS Exemptions Register, the property will be compliant with MEES even though the property itself may not meet the standard. Exemptions are linked to the landlord who has registered them, and these have a limited duration of five years. The situation is slightly different for a “new landlord”, who can only obtain a temporary exemption for a six-month period, during which time the new landlord will have to either make the required improvements, or re-register the exemption at the end of the six months.
If you are a landlord who has registered an exemption, you must ensure that the exemption has not passed its ‘sell-by date’. Otherwise, you could face enforcement action. However, determining the five years is not clear under the MEES. One interpretation regarding the Consent exemption is that the five years run forward from the registration of the exemption. This interpretation (although recommended by the non-Domestic MEES Guidance) does not entirely accord with the wording of regulation 31 of MEES, which requires that the landlord has been unable to increase the energy performance due to the tenant’s lack of consent in the preceding five years.
If the landlord has registered a ‘devaluation exemption’, then according to regulation 32, the requirement regarding the five-year period applies if the landlord has not been able to increase the energy performance because he has an independent surveyor’s report stating that making the improvements would reduce the value of the property by more than 5 per cent. It follows that the landlord must have had the report undertaken within the five years running up to the purported breach. An alternative interpretation is that the five years of the exemption run from the time of registering the exemption. This is not confirmed in the MEES Guidance, which only states that the devaluation exemption only lasts for five years.
If your MEES exemption is expiring, either you should have made the necessary improvements to the property or you will have to re-register the exemption, for which you will need fresh evidence. Alternatively, it is possible to register a different exemption.
In conclusion, as a commercial property landlord you should review your commercial properties and ensure that any MEES exemption you have previously registered has not expired or whether it is about to do so. If it has, you could be liable to a fine up to £2,000 for letting the property for less than two months after expiration, or £4,000 for more than three months.