In April last year, new Minimum Energy Efficiency Standards (MEES) came into force, making it illegal to let or renew the tenancy on a property in England and Wales if the energy rating on the EPC is lower than ‘E’. The intention is to help manage energy costs for tenants, improve the general condition of properties and reduce maintenance costs. The rules will extend to all tenancies from April 2020.
However it is worth understanding that from a landlord’s perspective, there is some confusion over what is legally considered a “new tenancy”.
The MEES 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.
And it’s the third point that’s the problem, because it contradicts what’s considered a ‘new’ tenancy in the rules around security deposits.
Security deposits need to be protected in a government-approved scheme until the end of the tenancy and re-protected when a new tenancy starts. That includes if a new tenancy agreement is signed with an existing tenant at any point. In the same way, when that new agreement is signed – because it is legally a new tenancy – the property must be energy rated ‘E’ or higher. That’s clear.
If a tenancy reaches the end of an initial fixed term and the tenant stays on after that without any new paperwork being competed, the tenancy simply becomes periodic. And the Tenancy Deposit Scheme website states: ‘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 remains 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, although MEES are contradicting this and saying ‘it is’.
So, there might be some ongoing debate and challenges to what is defined as a new tenancy and where and how that is applied.
Meanwhile, we’d 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, it’s worth considering upgrading the property to a higher rating if you can.
If you’d like any advice about when and how to make energy improvements, call into your nearest Your Move branch and one of the team will be happy to help.