EPCs and employee flats – a recap on the rules

When providing employee accommodation, employers should be mindful of their obligations to comply with The Domestic Minimum Energy Efficiency Standard (MEES) Regulations.

What are the MEES Regulations?

The MEES Regulations set a minimum energy efficiency level for domestic private rented properties. Under the current regulations, an EPC rating of E is required for all assured tenancies, Rent Act tenancies and some types of domestic agricultural tenancies. Some, but not all arrangements where employees live in employer owned accommodation need to comply with the MEES Regulations and employers need to be clear on their obligations.

An employee living in accommodation provided with their employment is likely to be either classified as (1) a service occupancy (2) a service tenancy, depending on how closely linked the employment responsibilities are linked with the use of the property.

Service occupancies

Service occupancies don’t require EPCs as the employee is considered a licensee as opposed to a tenant. Service occupancies exist where an employee’s use of the property is essential or for the better performance of duties. In Glasgow Corporation v Johnstone, the House of Lords said that where occupation of a property is essential or for the better performance of duties, the occupation ‘is not that of tenant’.

An employee stops being a licensee when their duties are not close enough to the use of the property. For example, while the use of a caretaker’s flat would be considered essential or for the better performance of duties, the use of a house on the site of a residential school by a schoolteacher may not be sufficiently connected to the better performance of duties. In the latter case the arrangement will likely be deemed an occupational tenancy which effectively is a tenancy (despite the misleading name). Having said this, occupational tenancies do not require EPCs so long as either no rent is charged, or rent is capped at £250 per annum (£1000 per annum in Greater London).

Landlord and employer obligations

The obligations on landlords and employers to comply with EPC ratings is complex and all set to change soon as Labour seek to impose stricter and more ambitious standards that will require rental properties to achieve at least an EPC of C by 2030. This is in line with a commitment to achieve net zero by 2050.

How we can help

We would be happy to guide you through the current legal requirements and the anticipated changes on the horizon and what this will mean to landlord employers. Please get in touch.