The MEES landscape one year on

MEES has yielded mixed results in its first 12 months. Karl Tomusk reviews the data from a freedom of information request to local authorities and finds that, despite a lack of enforcement, EPC ratings have improved regardless. Local authorities in England and Wales have failed to show a single enforcement proceeding over the Minimum Energy Efficiency Standards (MEES), which prohibit landlords from leasing commercial property with a “sub-standard” EPC and which came into force on 1 April 2018. A freedom of information (FOI) request to every local authority in England and Wales showed that no local authority had evidence of undertaking any enforcement proceedings or prosecuting anyone for not complying with the standards set out in The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. MEES prohibits landlords from letting space in commercial buildings that have an EPC rating of F or G unless it falls under an exemption, which includes places of worship and listed buildings. However, responses to the FOI reveal local authorities’ confusion and an inability to enforce these regulations because of a lack of funding. Of the 377 local authorities contacted, 204 reported no enforcement proceedings or prosecutions. The rest either did not hold the information or were not responsible for enforcement – because, for example, they might have been boroughs that were part of county councils with that responsibility. A lack of funding – and priority MEES set out a number of circumstances under which landlords are able to continue letting commercial property even if they have non-compliant EPCs. One of these is the “seven-year payback rule”, which says that a landlord can apply for an exemption if the costs of installing energy-saving measures outweigh the expected savings incurred over a seven-year period. That has led to challenges for local authorities. In its response to the FOI request, West Devon Borough Council said: “Due to confusion around the amount [landlords] should be paying, there has been no enforcement or prosecution,” adding that it was waiting for regulation change from the government. A spokesman for the council later pointed specifically to the regulations’ insistence that landlords should not foot the bill for improvement works as the cause of non-enforcement. Some funding was initially provided to landlords to help them improve their buildings. However, the council says: “As the funding has dried up, more and more landlords are applying for this exemption. This has made enforcing the standards very difficult for local authorities – as soon as we raised the matter, the landlord would apply for an exemption and the matter would go no further.” The government has responded to these complaints, and (as of 1 April) landlords will have to pay up to £3,500 to improve buildings with F or G EPC ratings. The West Devon spokesman added: “This will now make the regulations enforceable and West Devon Borough Council will adjust its enforcement activities accordingly.” Meanwhile, Leicester City Council said that the lack of enforcement proceedings was both a question of funding and priorities. Responding to the FOI, the council said: “Work on EPC matters has been assessed as being low priority for 2018/19. “We note that no additional resources were provided to local weights and measures authorities in order to take up the additional burden of the legislation, and it was introduced at a time when regulatory interventions/staff establishments have been reduced due to reductions of revenue funding.” The council added that although EPCs were not a high priority, it had not received any complaints relating to EPCs in the past three years. The Department for Business, Energy and Industrial Strategy was approached for a comment but did not respond.   The impact of MEES Despite the lack of enforcement, increasingly strict regulations appear to have had a significant impact on newly lodged EPCs. F- and G-rated buildings comprised just 4% of all new certificates between April and December 2018, according to a separate FOI request to the Ministry of Housing, Communities and Local Government. By contrast, 16.4% of all EPCs up to April 2018 fell below the threshold. The amount of A-rated certificates has jumped from 1.3%, pre-MEES, to 2.6% since April 2018, mirroring the rise seen in every EPC band above F and G (with the exception of A+, which still comprises a sliver of the market). There has been a steady fall in the percentage of F- and G-rated certificates since a peak of 20.2% in 2012. The decrease coincided with the Energy Performance of Buildings (England and Wales) Regulations 2012, which required owners to provide potential tenants or buyers with an EPC before marketing a property. However, the fall has been particularly dramatic in the past year as landlords anticipated the introduction of MEES. The percentage of non‑compliant certificates more than halved (from 9.7% to 4.6%) from 2017 to 2018. That trend is consistent throughout England and Wales, with the amount of F and G certificates tumbling from the mid-teens to low single digits in 2018. London has had the sharpest decrease. Prior to MEES, certificates under the threshold accounted for 17.3% of the capital’s total – the highest in any region. Since MEES, those ratings account for just 3.5% of the total – lower than any region besides the East and South East. Looking ahead Although the success of MEES has been mixed in its first year, with local authorities either unwilling or unable to enforce it, the industry should not mistake it as a trivial issue, particularly as regulations continue to tighten. So far, the data shows that a sharp decrease in the amount of F- and G-rated buildings has not necessarily meant a sharp increase in the top ratings. Although certificates that were rated B or above rose from 9.2% of stock before April 2018 to 13.3%, the amount of buildings on the threshold, with an EPC of E, rose to a record high of 19.6% after the regulations came in. That implies nearly a fifth of buildings are potentially at risk, given ever-evolving building regulations and the 10-year life of an EPC. As of 2023, MEES will extend to commercial buildings with existing leases, which means landlords will be unable to continue to let a sub-standard property. Stephen Preece, business development director at proptech company Arbnco, which develops software that finds ways to improve energy efficiency in commercial real estate, says landlords need to be aware of three things: when their leases come to an end, the EPCs for all their properties and when those expire. He adds: “Complying with MEES does not need to be as challenging as it initially seems. In fact, it’s a great opportunity to improve building stock, save carbon and reduce energy bills. “Ultimately, we need to shift the mindset away from seeing EPCs as a reactive tick-box exercise towards a proactive practice that can drive innovation and improve energy efficiency in the UK’s commercial property. A tightening of legislation and genuine enforcement could be the catalyst for that change.”   Who is responsible for enforcement? Every local weights and measures authority acts as the enforcement authority in its area. Enforcement authorities can choose how they enforce the standards (for example, whether they use trading standards officers or environmental health officers). Regardless of how MEES is enforced, it will probably fall under upper tier councils’ remit. In some instances, however, parts of the country with two tiers of local government did not seem to agree where the responsibility lay. Adur and Worthing Councils, for example, said the responsibility falls under West Sussex County Council. West Sussex replied that the “responsible and relevant authorities” are the borough and district councils.