George Wilson from our commercial property team highlights how the recent tightening of regulations to prevent the letting of ‘sub-standard’ properties affects farm tenancies and rural residential lettings.
The let property market is governed by the Minimum Energy Efficiency Standards (MEES) which is imposed under the government’s Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.
As part of this governance, MEES uses Energy Performance Certificates (EPC), to assess the energy efficiency of a property. EPC certification measures energy efficiency ratings using a measurement of ‘A’ for very efficient down to ‘G’ for inefficient.
Since April 1, 2018 under the guidance of this standard, private residential properties may only be let if the property has a minimum energy efficiency rating of E.
Properties with a rating of F or G cannot be let. In certain circumstances, landlords are obliged to carry out improvements to the property to increase the energy rating to comply with MEES.
From April 2020, it became an offence to continue letting a ‘sub-standard’ property, being a property with an EPC rating less than E.
What does it mean to the residential lettings on my farm or rural estate?
It is not uncommon for old country cottages and houses on rural properties, often absent of double glazing and proper insulation, to have a poor EPC rating of F or G.
In addition, on many farms and estates, tenants have been in occupation for long periods of time, sometimes decades on an informal or periodic basis. The challenge faced by some farms and estates is that these informal or periodic tenancies will likely constitute continuing to let a ‘sub-standard’ property.
If a property you are letting has an EPC and a rating of F or G, the overwhelming likelihood is that you are in breach of MEES. You can check online on the EPC Register.
What if I am letting a rural property without an EPC?
If the letting of your rural property commenced prior to October 2008, and there is no EPC, you may well be safe. For example, say you granted a fixed term tenancy of twenty years from April 2008, and there is no EPC for the property, there is no breach of MEES.
This is because there was no requirement to have an EPC at the grant of the tenancy and as the tenancy is continuing, there is no trigger event requiring an EPC to be provided.
However, it is unusual for long-term tenancies of residential properties to be granted, so the overwhelming likelihood is the tenancies on your estate commenced on a six or 12-month trial period.
When managing a busy farm or estate it is easy to just let these tenancies continue past their ‘end date’ and continue with a statutory periodic tenancy. In this scenario, unfortunately, it is likely that you have been caught by the MEES and are in breach.
In the event you let a property without providing an EPC prior to April 2020, or continue to let a property without a valid EPC you will be in breach of MEES and should seek advice on how you can remedy this.
What action can be taken against me for breach MEES regulations?
The MEES s are enforced by the local authority for each property. The sanctions depend on the length of the breach and are ultimately at the discretion of the enforcing authority, subject to the maximum penalties set out below for each offence:
- Less than three months: £2,000 per property
- Three month or more: £4,000
In addition, there are further penalties for failing to comply with a compliance notice and providing false or misleading information. It should be noted that the enforcing authority is limited to imposing a maximum cumulative total of all breaches in respect of a property to £5,000.
The enforcing authority can also impose a publication penalty in addition to or in substitution for a financial penalty and will publish details of the breach on the publicly accessible part of the PRS Exemptions Register.
Observations on MEES regulations’ impact
The main concern MEES gives rise to is regarding estates and farms with a portfolio of properties, which are in breach of MEES. The penalties could reach £5,000.00 for each property. If an enforcing authority discovers that an estate or farm is in breach of MEES on a major scale, there could be potentially crippling fines levied by them.
We have not seen enforcing authorities actively enforcing MEES yet, but post pandemic we may see them looking for money and we are sure enforcing MEES could be a good source of income.
Finally, and perhaps most significantly, a breach of MEES prohibits a landlord from serving notice on a tenant. This is often discovered as an issue when it is too late to deal with, which may result in a tenant being afforded protection from eviction due to an oversight by a landlord or their agent.
It is important for estates and farms to review their residential lets and ensure they remedy any existing breaches to prevent financial penalties in the future. For further information regarding farm tenancies and the management of rural properties for letting, please contact Harrison Drury’s commercial property team on 01772 258321.