Landlords must now tick numerous boxes prior to letting a residential property, the latest addition to the list is the Minimum Energy Efficiency Standard (MEES).

What is MEES?

MEES is part of the Government’s strategy to meet international commitments on carbon emissions reduction. Property, as a major source of carbon, has not escaped the carbon crackdown.

What has changed?

All new lettings since 1 October 2008 require the tenant to be provided with an Energy Performance Certificate (EPC). EPCs provide an A-G rating of energy efficiency of the property and can be obtained for around &60-&80 from a local assessor. From 1 April 2018, MEES has introduced  a minimum rating of an ‘E’ for new residential lettings. It is now illegal to advertise or let a property with a rating of below an ‘E’. Furthermore, from the 1 April 2020 MEES imposes the same minimum rating of an ‘E’ to all existing lettings. The rules apply equally to Protected Agricultural Tenancies, Rent Act Tenancies and Assured Shorthold Tenancies.

This creates a problem for property owners with traditional cottages or large inefficient farmhouses where an ‘E’ rating cannot easily be achieved, even with the current availability of grant funding for some improvement measures. However, many of these properties will not actually be inside the scope of MEES and therefore the need to improve energy efficiency prior to 2020 can be avoided.

Properties outside scope or exempt

Properties that have been let continuously by the same landlord to the same tenant since before 1 October 2008 will not need to comply with MEES. MEES only applies to properties that are legally required to have an EPC and if no new letting or sale has occurred there is no legal requirement for an EPC and therefore MEES does not apply. A property which has been let since 1 October 2008, but the EPC has expired or will expire before the 1 April 2020 will also be missed by the regulations.  In his case, there is no requirement to renew the EPC, which becomes invalid after 10 years. The lack of a valid EPC on 1 April 2020 will mean such properties do not need to comply with MEES. EPCs can be retrieved from the EPC register online if you are unsure of the position of a property.

Exemptions can also be obtained in cases where the landlord is unable to comply with MEES. Exemptions are registered on the Private Rented Sector Exemptions Register, found on the Government Website. Exemptions last for 5 years and evidence must be provided to support an exemption. 

Penalties

Landlords who do not comply can face fines of up to &5,000 from the local authority and given the EPCs are publicly available and new tenants have to contact the local authority to begin paying council tax, being stumped by MEES is not a risk worth taking.

Fisher German have the expertise to help navigate the increasingly onerous field of compliance with MEES, Gas Safety, Smoke and Carbon Monoxide and the forthcoming ‘septic tank’ or General Binding Rules.

For further information, contact Scott Howard on 01858 410208 or email here

While the guaranteed rental income received from a Farm Business Tenancy is appealing, HM Treasury’s Office of Tax Simplification is currently undertaking a review of inheritance tax (IHT) and the reliefs available. There continues to be concern that this could impact on the availability of Agricultural Property Relief (APR) in the future. (APR currently provides 100% IHT relief on agricultural assets under an FBT).

When structured and operated correctly, contract or share farming agreements will attract Business Property Relief. Although contract farm agreements for arable farming scenarios are fairly common, share farming agreements are particularly well suited to livestock enterprises, but are less familiar.

Share Farming is a type of joint venture in which a farming landowner provides the land, buildings and fixed equipment, and collaborates with a share farmer who provides machinery, labour and some working capital. Both parties maintain separate trading businesses and bank accounts. Usually the value of any breeding livestock is split between the two parties, and all income and expenditure is shared between the parties according to an agreed percentage split. The landowner will typically claim the agricultural subsidies, but the income generated will form part of the agreement.

This type of arrangement benefits both parties, and is a worthwhile option when considering the future of a farm business. The landowner should be able to maintain his status as a trading farmer for the purposes of income tax, capital gains and inheritance tax reliefs, and can retain an active involvement in the management of the farm. The share farmer can manage his own farming business without the significant capital investment in land and buildings. Both parties are likely to bring differing but equally valuable skills, perspective and energy to the arrangement, and it is particularly attractive for new entrants to the industry who may not have sufficient capital to buy or rent their own farm.

In order to be effective, the terms of the share farm agreement should be formalised and documented. Each party will find it useful to draft a budget to support negotiations of a fair split of the gross output from the arrangement. However, it is also essential that the landowner retains an active ongoing interest in the day to day management of the farming enterprise which should include regular and recorded meetings to discuss future strategy, and an involvement in any stock sales and purchases. A good working relationship is essential, and at the end of each trading year, the profits to each business should be reviewed to ensure the arrangement can continue effectively for both parties.

Fisher German are involved with a number of share farming agreements and are well placed to advise on the suitability and then the establishment and ongoing supervision of the arrangement.

Contact Charlotte Gore on 01858 410200 or email here