and Landlord Advice
written by Raees Khan
Minimum energy efficiency standards (MEES) are novel regulations that are set out by the government, making it unlawful to sell or let out a property that has an electrical performance certificate (EPC) rating of below an E. The intention behind MEES is to improve overall energy standards of properties to achieve a net-zero carbon economy by 2050.
There is plenty of government guidance surrounding the implementation of MEES for both landlords and local authorities. Nonetheless, the extent to which the implementation of MEES will help to achieve the net-zero carbon target is questionable because of the weaknesses in the enforcement, measurement and scope of MEES.
Primarily, there are weaknesses in the enforcement of MEES which can make it easy for rogue landlords to evade obligations.
So, this means that whilst the compliant landlords make efforts to improve the energy standards of their properties, the rogue landlords may not, which inevitably curtails the impacts of MEES.
The weaknesses in enforcement stems from various local authorities’ reactive, as opposed to proactive, approach. This can be attributed to cuts over the past decade to the budget of local authorities, as well as communication issues within two-tier local authorities whereby trading standards work at the county level and environmental health at the district level.
Some local authorities have been so ineffective in enforcing MEES that Birmingham City Council has openly conceded to not proactively enforcing the matter at all.
This clearly makes it easier for the landlords in the private rented sector (PRS) to evade obligations, which erodes the impact of MEES because combatting energy inefficiency requires collective action.
Also, this entails that the financial penalties of non-compliance, ranging from £2,000 to £150,000 fines, become purely symbolic, where the enforcing bodies themselves are admitting to not taking action.
When providing solutions to such enforcement issues, the circumstances of the landlord must be regarded to best protect the PRS and supply of houses in the market. It is for this reason that innovative market-based solutions are required to solve the enforcement issues. Fundamentally, technology and data-driven solutions are of utmost importance because this can enable local authorities to penetrate properties that are flagged up on an algorithm, taking a targeted approach.
This means that further government intervention may not be required, and it is one of the least invasive mechanisms that target the most energy inefficient properties. Also, technological solutions are very effective at making the most of limited resources.
Therefore, such innovative solutions can also overcome the issues of finite resources and budget constraints facing local authorities.
In terms of practical advice for landlords going forward, there are two main suggestions. Firstly, getting a new and up-to-date EPC is strongly recommended, which should cost in the region of £60-£100.
A well-conducted EPC is likely to result in a substantially improved rating compared to older EPC’s created five or ten years ago, especially if some improvement works have been carried out over the period. Ten years ago, there was little regard for what the rating on the EPC was as long as an EPC was present.
Accordingly, a more current EPC is certainly recommended so that all options can be evaluated. Secondly, depending on what the EPC rating is, improvement works are strongly advised to avoid the property suffering from a ‘brown discount’ for a lower rating.
Admittedly, this does involve an increase in the short-run costs, which can be even more detrimental to smaller landlords in the market, though the long-run benefits strongly outweigh this. For example, higher-rated properties can benefit from a ‘green premium’, in turn adding value to the property.
Also, tenants are becoming increasingly aware of EPC ratings as a more efficient property can entail lower running costs, saving them money. Hence, if a landlord can effectively utilise government grants, they can essentially increase the value of the property in the long run and meanwhile have the improvement works subsidised.