What the education sector needs to know about the new energy efficiency regulations
Against the background of the Department for Education stating that they ‘are putting climate change at the heart of education’ and implementing a new curriculum to teach children about their impact on the world around them, it is worth highlighting the impact that schools themselves have. Schools in England have a carbon footprint of 9.4 million tonnes of carbon dioxide from using 11 million kWh energy per year of direct emissions. The Sustainable Development Commission estimates that these figures will remain constant through to 2050 due to increased hours of usage alongside energy efficiency measures.
Establishing a minimum level of energy efficiency for privately rented property, the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 apply to schools and colleges too. More commonly known as the ‘MEES Regulations’ (‘MEES’ is short for ‘minimum energy efficiency standard’), it is more important than ever that schools and colleges understand how to comply with the regulations given recent changes to the rules.
How do the MEES Regulations apply to schools and colleges?
The MEES Regulations apply to both domestic (DPR) and non-domestic privately rented (NDPR) properties. For an overview of what occupiers of NDPR properties need to know about minimum energy efficiency standards, see this earlier Passle by Jo Bryan: What do office occupiers need to know about EPCs and MEES regulations?.
- is situated in England and Wales;
- is let under a tenancy; and
- is not a dwelling.
Schools and colleges would therefore be considered NDPR property under this definition because they will usually occupy land as leaseholders or as freeholders who also act as landlords. However, an important exception applies to academies – as will be explained, the MEES requirements do not apply to their own occupation as leaseholders. Since some schools and colleges will fall within the scope of the MEES requirements for NDPRs, it is important for them to know that they will be primarily responsible for complying with these requirements if they are acting as landlords. Where they are tenants, the issue will be who bears the cost of any required improvements to the premises.
As landlords, schools and colleges will also need to consider what are commonly known as the ‘EPC Regulations’ (‘EPC’ stands for ‘energy performance certificate’). The Energy Performance of Buildings (England and Wales) Regulations 2012 requires landlords to provide occupiers with a valid EPC on new lettings. An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient), and the MEES Regulations make it an offence for a landlord to grant a new lease with an F or G energy rating. The first stage of the MEES Regs 2015 came into force in April 2018, affecting schools that granted leases after that date. The most recent development for these schools to be aware of is that from 1 April 2023, it will be unlawful to continue to let an NDPR property with an F or G EPC rating, even if the lease was granted prior to the MEES Regs coming into force in 2018.
Schools and colleges as leaseholders
Community schools will normally occupy land owned by the local authority. Church of England schools may partly hold their land from the local education authority and partly from the local diocese. However, some schools have now converted to become academies. They will use DfE’s model lease to negotiate the transfer of that land from the local authority to the academy trust.
Most academies were previously community schools with 125-year leases of their schools, but an important exception to the MEES rules on NDPR property is that leases for over 99 years do not fall within MEES (MEES Regs 2015, reg 20(3)(b)). This means that schools with a very long lease are not concerned with MEES when it comes to their own occupation, and also that the DfE template lease of a school from the local authority to an academy trust will not fall within the scope of the MEES requirements. However, if these schools sub-let part of their premises, the subletting is likely to fall within the scope of the requirements.
At the start of 2021, 37% of primary schools were academies and 78% of secondary schools were academies, and so the MEES requirements would not apply to the leases under which those schools occupy their premises. As for other types of schools, such as community and church schools, it is the local education authorities and local dioceses that would be acting as landlords and who would therefore be primarily responsible for complying with MEES requirements.
Schools and colleges as freeholders
Additionally, some academies may previously have been other types of school, such as foundation schools, and in this case, they may own the freehold of their school. It is only when these schools also act as landlords that they will have obligations under the MEES Regulations.
Schools and colleges as landlords
While schools and colleges may not see themselves as landlords, they may well be considered as such if they are letting any properties. Examples where schools will need to comply with MEES requirements include:
- if outside businesses provide nursery and/or breakfast club and/or after-school services in properties owned by the school
- if a school has a children's centre or scout hut or sub-lets part of its school back to the local authority or another entity
- if the school has portable cabin style buildings which are let out
- if people are occupying caretaker's cottages, the MEES rules on domestic properties would apply meaning that from 1 April 2020, these schools can no longer let or continue to let these properties if they have an EPC rating below E, unless they have a valid exemption in place
How MEES applies to schools and colleges that act as landlords
It is schools and colleges acting as landlords who are the most likely to be affected by the MEES Regulations because the main obligations imposed under MEES fall on landlords. The major risks for these schools and colleges are:
- school or college facilities let to outside businesses that are considered substandard under the MEES Regulations become unlettable and after-school services etc may need to be halted
- the financial cost of upgrading
What schools and colleges can do to comply with MEES
To ensure compliance with MEES, schools and colleges acting as landlords may want to add these two things to their task list:
1. Arrange for an EPC?
The ‘no EPC yet’ scenario
If, at this stage, the school or college is letting properties that still do not have an EPC, then they may not even fall within the scope of the MEES Regs 2015. NDPR property only falls within the scope of the MEES Regs 2015 if the property has an EPC: if a property has not been sold or let or constructed or refurbished in a way that modifies fixed heating, air conditioning or mechanical ventilation systems (triggering the need for an EPC under EPC Regs 2012, the earlier EPC Regs 200, or the Building Regs 2010), then the property falls outside the scope of the MEES Regs 2015.
An EPC is only needed when an existing building is sold or rented out, when a building under construction is finished, or after refurbishment/modification (EPC Regs, regs 6 and 7). Therefore, while over time it is likely that all landlords will come within the regime (e.g. because they want to sell or re-let or because of future anticipated changes to legislation which will make EPCs compulsory), in the short term, schools and colleges acting as landlords should think very carefully about voluntarily getting an EPC unless they fully understand the consequences.
The ’new lease’ scenario
As EPCs are only valid for ten years, there are some scenarios highlighted by the guidance on NDPRs where issues may arise for these schools and colleges when considering MEES compliance. One scenario is where the school or college as landlord wishes to let a property on a new lease from April 2018: if the EPC is more than ten years old, or, if there is no EPC, then they need to obtain a new EPC to let the property, but if that EPC has an energy efficiency rating of ‘F’ or ‘G’ then the school will need to carry out sufficient energy efficiency improvement works so the property improves enough to earn a minimum rating of ‘E’ (or to register a valid exemption if this applies) before issuing a tenancy agreement.
2. Review terms of existing leases
The ‘existing lease’ scenario
For schools and colleges that own buildings subject to an existing lease where the EPC rating is below an E, the letting is now unlawful unless the building is upgraded or unless an exception applies. The terms of that lease will need to be reviewed to see what freedom the landlord has to carry out works of improvement and who bears the costs of such works. If the existing term ended before 1 April 2023, then schools and colleges will need to consider whether they are able to upgrade the property before entering into a renewal lease and if they have the funds to do so. For terms that do not end before this date, the schools or colleges will need to consider if they can and should bring the lease to an end anyway or if they have the funds and can go ahead with the necessary improvements whilst the properties are still being used by children. A review may also include how lease terms, renewal cycles, EPC expiry dates, break dates, and planned refit periods align with the MEES timetable. Schools and colleges may also wish to update their standard leases to include suitable lease provisions for MEES.
- Schools and colleges that occupy as leaseholders may be asked by their landlords to contribute to the cost of works to improve the energy efficiency of buildings: they should check the terms of their leases to see whether landlords are entitled to pass on these costs.
- Schools and colleges who act as landlords of areas of their premises need to check:
- Whether continuing to let the premises is lawful
- If works are required, can the cost of these works be passed on to tenants?
- Where there is no EPC or an EPC has expired is it necessary to obtain a new EPC? If it is not necessary, think carefully before an EPC is voluntarily commissioned.
Please contact Jenny Arrowsmith in our Education team if you would like to discuss any of the above.