The buy-to-let landlord’s SWOT analysis of minimum energy efficiency standards

How to avoid massive fines from a local authority

Buy-to-let landlords will soon have to pay massive fines if their properties don’t comply with minimum energy efficiency standards (MEES). And when we say massive, we mean MASSIVE. If you let a property that is in breach of the MEES regulations, the local authority could fine you 10% of the rateable value of the property. The minimum fine will be £5,000. These fines rise to 20% of rateable value and a maximum of £150,000 if you continue to let the property in breach of MEES for more than three months.

If this doesn’t scare you, it should. We expect local authorities will be aggressive in pursuing fines under MEES. Buy-to-let landlords who flout the regulations could provide a very valuable source of extra income for councils up and down the country.

However, it’s not all bad news. In this article, we’ll describe how a landlord can assess their properties’ MEES-related strengths, weaknesses, opportunities, and threats (SWOT analysis).

What is MEES?

MEES was first introduced in 2015. The standards require buy-to-let properties to have an energy performance certificate. These regulations are being tightened further:

  • From April 2018, your properties must have an EPC rating of at E or above
  • From April 2020, your properties must have an EPC rating of at G or above

What properties are likely to fail MEES?

Building regulations ensure that new build properties comply with current MEES. It is older properties that are most at risk of non-compliance. However, as a rule of thumb, MEES doesn’t apply to properties:

  • That is exempt to have an EPC
  • Where the EPC is over 10 years old
  • On which tenancies are less than 6 months with no right of renewal
  • On which tenancies are more than 99 years

It’s a difficult job to assess whether a property is caught by MEES because you have to examine two sets of regulations: Energy Performance of Buildings (England and Wales) 2012 and the MEES regulations.

Are exemptions available?

There are exemptions which would allow you to continue letting your property even if it fails MEES. These are:

The Golden Rule

If you have done everything possible to increase energy efficiency and the property still fails to meet MEES. Improvements that you would have to evidence include:

  • Double glazing
  • Insulation to all pipework
  • Wall insulation (providing it would not damage the fabric of the property)
  • Door and window insulation

The Devaluation Rule

If an independent surveyor states that making improvements would devalue your property by 5% or more.

Third Party Consent Rule

If your tenant refuses the improvements needed (or entry to the property to make them).

What is your SWOT analysis for MEES?

Each buy-to-let landlord’s property portfolio is likely to have strengths and weaknesses regarding MEES. If your properties are new builds, they should be MEES compliant. Older properties probably won’t be. These strengths and weaknesses are reasonably easy to understand, though they are complicated by the exact scope of all the regulations involved. You may need help deciphering these.

Threats

The major threats for most buy-to-let landlords will be that of a massive fine, or the costs of improving a property to comply. In addition to this, there is the cost of a void period should you be unable to let your property because of non-compliance with MEES.

Some landlords may seek to recoup the cost of upgrading for MEES from their tenants. However, there are cases where you cannot do this. For example, your tenancy agreement may not allow you to do so. Also, if you are hoping to delay compliance for as long as possible, a standard agreement is likely to trigger your landlord obligations.

A final threat is that your tenant refuses you entry to make improvements.

Opportunities

There are also some general opportunities for buy-to-let landlords. For example, if your tenancy agreement allows, you could share the cost of improvements with your tenant. The rationale is that the improvements will benefit your tenant because they should lead to lower energy and utility bills.

You may be able to increase the rent you charge on MEES compliant properties, especially if you combine MEES improvements with other upgrades.

How can you prepare for April 2018?

All buy-to-let landlords should assess their property portfolios immediately. There is no time to waste. As the deadline nears, it is likely to become more difficult to book EPC inspections, and then to undertake any work needed to become compliant with the regulations.

We are already helping buy-to-let landlords avoid those massive fines and negative consequences of non-compliance with MEES by:

  • Helping to audit property portfolios in line with the scope of MEES and the Energy Performance of Buildings Regulations.
  • Carrying out energy assessments to ensure current EPC ratings are correct.
  • Ensuring that tenancy agreements allow buy-to-let landlords the leeway they need to comply with the MEES timetable.
  • Rewriting tenancy agreements were needed to ensure that landlords can meet their obligations.
  • Reviewing rental prices to ensure they are in line with other MEES compliant properties in the local area.

Are you prepared for MEES?

  • Can you afford to take the chance that your buy-to-let property is compliant?
  • Has your letting agent spoken to you about MEES yet?
  • Could you afford thousands of pounds in fines levied by the local authority?
  • Have you had your property EPC assessed in the last two years?

If you answer no to any one or more of these questions, then you should contact one of the Ezytrac team today on +44  01522  503  717. We’ll be happy to discuss MEES with you, what it could mean for you, and how you can best prepare for MEES to avoid becoming a local authority’s next cash donor.

Yours in effortless property management,

Brett Alegre-Wood MARLA MNAEA

About the Author:

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Ezytrac. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids. Brett holds both the Level 3 Property Mark Qualifications for Property Sales and Property Lettings and Management.