Real Estate Focus - February 2025

MEES consultation for private rented homes: 2025 update

On 7 February, the government launched a new "update" consultation on its proposals to raise Minimum Energy Efficiency Standards (MEES) for private rented homes in England and Wales by 2030. This will be achieved by making amendments to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (PRS Regulations).

The government contends that the recently published consultation on the future of Energy Performance Certificates provides an opportunity to ensure that new standards in the Private Rented Sector (PRS) incentivise the right measures for each home. It is proposing to set higher MEES standards against the new metrics which will be introduced as part of the EPC reform (projected to be implemented in 2026).

The government's preferred approach is then to require landlords to prioritise meeting a standard set against the "fabric performance metric" (which is likely to require similar improvement measures as meeting an EPC C on current EPCs), and to then meet a standard set against either the "heating system metric" or the "smart readiness metric". The desired outcome is to deliver significant bill savings for tenants and improve the thermal comfort of privately rented homes, whilst also encouraging decarbonisation.

The consultation is, in particular, seeking views on:

• a landlord's requirement to invest up to £15,000 per property on improvements to meet the standard (the "cost cap") after which they can register a 10-year exemption to continue to let the property if it does not reach the required standard;
• proposals for the higher standard to apply to new tenancies from 2028, with all tenancies required to be compliant by 2030;
• for properties remaining below EPC C following 2026 EPC reform, a requirement for landlords to commission a new EPC before taking action to comply with the higher standard (those properties already at EPC C will be considered compliant until their existing EPC expires);
• whether to introduce an affordability exemption which will lower the cost cap to £10,000 for some properties;
• whether to increase the scope of the PRS Regulations to include short term lets to ensure a consistent standard between privately rented homes and short term lets;
• what regulatory measures could be used to drive the installation of smart meters in privately rented homes; and
• the existing exemptions regime for the PRS Regulations and whether there are other instances in which exemptions should apply.

The proposed measures are part of the government's "Warm Homes Plan", its ambitious strategy to upgrade five million homes to "cut bills, slash fuel poverty and support people to take greater control of their energy with clean technology like heat pumps, batteries and solar panels".

The policy proposals also link closely with wider government work being done to improve standards in the private and social rental sectors including The Renters Rights' Bill and the Decent Homes Standard.

A step in the right direction

Whilst the proposals are undoubtedly steps in the right direction in terms of updating performance metrics of buildings, and contributing towards net zero targets, they will place yet more obligations on landlords (who are already contending with prospective large-scale regulatory changes under the Renters Rights Bill, and leasehold reform measures) to install potentially extensive measures to improve a building's heat retention and reduce energy consumption.

The consultation closes on 2 May 2025, and you can respond by clicking here.

Leasehold Reform: Government starts to deliver on promises

Following his November 2024 statement, the Minister for Housing and Planning is sticking to his promises and starting to bring into force various provisions of the Leasehold and Freehold Reform Act 2024 (LFRA 2024).

These changes have been brought into effect within the government's projected timescales, signifying its commitment to the ongoing reforms. That said, with landlords and freeholders having now been granted leave to apply for judicial review of some LFRA provisions, it remains to be seen whether the remaining reforms proposed by the LFRA will be subject to further change. We explore the changes below.

End of two-year qualifying period to extend leases / purchase freehold

In January, commencement regulations brought into force section 27 LFRA (on 31 January), removing qualifying criteria to extend leases, or purchase freeholds, such that tenants no longer need to have owned their property for two years. However, tenants commencing a claim will need to be registered as the proprietor of their lease, so any Land Registry delays in completing an application to register their lease will impact upon the time from which the tenant can commence a claim.

Right to Manage Regime

The Right to Manage (RTM) regime allows some residential leasehold property owners to take over management of the building in which their property sits. These powers are contained in the Commonhold and Leasehold Reform Act 2002 (CLRA 2002). Further LFRA commencement regulations published on 6 February will bring into force the following changes to the RTM regime from 3 March.

Change of non-residential limit on RTM

From 3 March, an RTM claim can be made in relation to buildings with up to a 50% non-residential element (the previous threshold being only 25%). This will bring a large number of buildings within the scope of RTM which would previously not have qualified.

Changes to costs position for RTM claims 

As it stands under the CLRA 2002, an RTM company is liable for all costs of the landlord or any management company in dealing with a claim for RTM. The recent amendments mean the starting point will shift so that an RTM will not be liable for any landlord / management company costs except in certain circumstances. These include:

• where a court or tribunal has the power to order the RTM to pay costs, and it makes such an order; and
• where the claim notice to acquire the RTM is withdrawn, deemed withdrawn or ceases to have effect and the RTM company acts unreasonably in giving a claim notice or not withdrawing it sooner.

Even in the latter circumstances, the costs need to have been reasonably incurred.

This will likely lead to landlords being unable to recover most if not all of their legal costs when considering the validity of an RTM claim unless the claim is withdrawn or invalid, and the RTM company has acted unreasonably.

Jurisdictional changes

From 3 March, the First Tier Tribunal (as opposed to the County Court) will be given jurisdiction to enforce the obligations of a party in relation to a RTM claim.

Changes to New model articles for RTM companies

The government has also laid down regulations (alongside the regulations amending the RTM regime) limiting the rights in the RTM company available to freeholders and intermediate landlords to an overall cap of 1/3rd of the votes exercisable by qualifying tenants. This will prevent landlords (from whom the RTM has been claimed, and who may hold a number of flats in the building and therefore qualify as part of the RTM company) from ultimately controlling the management of a property via the RTM.

Moth misrepresentation leads to luxury home sale unravelling

It is not every day that a £32.5m judgment is handed down for fraudulent misrepresentations contained in pre-contract enquiries, but on 10 February, that is what happened in the widely publicised case of Patarkatsishvili and another v Woodward-Fisher [2025] EWHC 265 (Ch). Apart from the court’s interesting discussion regarding the principles or misrepresentation and equitable remedies, the case serves as a wake-up call to sellers of any type of property that providing false replies to enquiries could have severe adverse consequences.

Facts

In 2013, the defendant completed extensive renovation works of their luxury home in west London. Subsequently in early 2018, a moth infestation was discovered at the property, embedded within the wool insulation which had formed a large part of the renovation works. Despite various pest control firms being engaged to remove the infestation, it was essentially confirmed in reports that the only solution would be the complete removal of much of the insulation works. Instead of pursuing this option, the defendant seller proceeded with periodic spray treatments and subsequently marketed the property for sale in 2019.

During the sale process, the pre-contract enquiries included questions asking whether or not the property had ever been affected by vermin infestation, for provision of any reports concerning any vermin infestation, and whether or not the seller was aware of any defects in the property not apparent on inspection. Despite the continuing moth issue, the defendant replied that he was not aware of, and the property had not been surveyed for, such issues (despite reports having been prepared by the aforementioned pest control experts).

The sale proceeded…however, once the buyers discovered the truth, they sought recission, in other words, for the property to be handed back, with a full repayment of the purchase price plus interest and damages. They argued that the replies to enquiries were knowingly untrue (i.e., misrepresentations), and were consequently induced to purchase the property as a result of those misrepresentations.

Court's findings

The court found that the defendant's replies to enquiries did amount to misrepresentation. The judge clarified that the definition of "vermin" extended to both animals and insects which are "capable of infecting a residential house and causing a problem to the occupier of the house". This would therefore include moths.

Despite the claimants themselves not having read the replies to enquiries, it was found they relied on the replies which had been reviewed by both the claimant's agents, wealth managers and legal advisors who proceeded to advise on the basis of the false information. The claimants successfully persuaded the court they would not have purchased the property had they known the truth regarding the moth infestation.

Even though the defendant was, at the time of judgment, not in a position to raise and consequently return the purchase price to the claimants, the court found this was not in itself a defence to recission.  The court ordered the claimants to return title to the property back to the defendant, subject to a lien or equitable charge in favour of the claimants (offered by the claimants as a form of “counter restitution”). This would allow the defendant time to deal with the moth infestation before selling the property and obtain enough funds to repay the £32.5 million to the claimants (less an amount to take into account the years the claimants lived there), along with other substantial damages.

Comment

Whilst the "caveat emptor" (buyer beware) principle holds some weight in property transactions (with the expectation that buyers will conduct surveys, seek legal advice, make their own investigations etc), this does not negate a seller's duty to disclose defects or mislead a buyer with untrue statements in replies to enquiries. The judge made it clear that this case was an extreme one, and it is understood that the defendant may appeal. But it certainly emphasises the need for sellers to take extra care when reviewing and responding to property enquiries so as not to be hit with potentially significant liability down the line.