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On 15 October 2019, the government commenced a consultation process querying whether the minimum energy efficiency standards (‘MEES’) for private-rented non-domestic property should be increased in England and Wales.
Since April 2018, landlords of non-domestic property have been prohibited from granting new tenancies of premises with an Energy Performance Certificate (‘EPC’) rating of ‘F’ or ‘G’. This prohibition will extend to the renewal of existing tenancies from 1 April 2023.
The government’s consultation makes clear that they would like to see a significantly heightened minimum EPC rating of ‘B’ in private-rented non-domestic property by 1 April 2030. This is referred to as their “preferred trajectory“. However, a minimum EPC rating of ‘C’ is also proposed in the consultation as an “alternative trajectory“. The consultation asks for comments on these proposals.
Either trajectory would be subject to existing MEES exemptions (see our previous articles which consider certain exemptions here, and here). It is also acknowledged that certain properties will not be able to achieve the demanded EPC standard; for these, landlords would have to demonstrate that they have achieved the highest EPC rating deliverable by a cost-effective package of measures.
In this context, cost effectiveness of energy efficiency improvements would be measured according to the existing seven-year “payback test”. In simplified terms, this test is met if the expected value of savings on energy bills over a seven-year period is equal to or greater than the cost of the improvements carried out.
The government’s consultation also asks whether, in trying to meet their proposed trajectories, landlords would prefer to a single deadline of 1 April 2030, or various phased deadlines through the 2020s.
The government estimates that their preferred trajectory, “would require an investment cost of approximately £5 billion between 2019 and 2030“, but that the return on this investment would be “substantial“. Aside from the cost, there are other challenges which the government considers in its consultation. For example, the government queries whether the EPC-system could itself be improved; stating that, “the EPC is not a tool that can reflect or value improvements in operational performance“. The government also questions whether enforcement of the MEES Regulations can be improved in light of their proposal. The government is currently carrying out a pilot, with several local authorities, to determine how the MEES Regulations can be most effectively enforced.
The government’s consultation document can be accessed here. Responses are required by 7 January 2020.