Minimum Energy Efficiency Standards (MEES) came into force in April last year, making it illegal to let or renew the tenancy on a property in England and Wales with an EPC energy rating of ‘F’ or ‘G’. This is in an effort to help manage energy costs for tenants, improve the general condition of properties and reduce maintenance costs. The rules will extend to existing/continuing tenancies from April 2020.
The issue for landlords currently is that there is some confusion around what is considered a new tenancy. The legislation says the minimum ‘E’ rating is currently required when:
- You grant a new tenancy
- You renew or extend an existing tenancy with fresh paperwork
- A statutory periodic tenancy comes into effect at the end of a fixed-term assured tenancy (shorthold or non-shorthold). At that point, the law effectively imposes a new tenancy on the parties.
While the first two points are clear and consistent across lettings legislation, the third contradicts what is considered a ‘new’ tenancy in other areas, such as security deposits.
When landlords take a security deposit, it must be protected in one of the government-approved schemes until the end of the tenancy and must be re-protected if a new tenancy begins – including if at any point a new tenancy agreement is signed with an existing tenant. Similarly, when that new agreement is signed, as it is legally a new tenancy, the property must be energy rated ‘E’ or higher.
However, if a tenancy has begun with both parties signing a fixed-term AST and the tenant stays on after that, the tenancy simply becomes periodic and no new paperwork is necessary. As stated on the Tenancy Deposit Scheme website: ‘As the tenancy turning periodic does not indicate the end of the tenancy, then the deposit would not need to be re-protected provided the tenant(s), landlord(s), premise, and deposit scheme all remain the same.’
The deposit must remain protected until notice is given and the tenancy has ended, so in terms of deposit protection law, a tenancy becoming periodic is not a new tenancy. In contradiction, MEES says that it is.
While there could be some debate and challenges to what is defined as a new tenancy and where and how that is applied, we would advise all landlords to take any necessary energy improvement measures as soon as possible. And, as the Government is proposing that from April 2022 properties must be rated ‘D’ or above for new tenancies - extending to all rented properties in 2025 - you should consider that the minimum requirement.
If you would like any advice about when and how to make improvements, call into your nearest branch and one of the team will be happy to speak to you.