New Energy Efficiency Regulations 2015 for Private Rented Property

Landlords of domestic and non-domestic private rented premises must prepare for new regulations requiring many of them to make energy efficiency improvements to their properties before they can continue to be rented out. In England and Wales, from April 2016, private landlords of domestic properties will have to consent to specific types of energy efficiency improvements their tenants want to carry out and from April 2018, private landlords will be unable to rent out either domestic or non-domestic properties that have not achieved a minimum “E” energy rating.

PRIVATE RENTED PROPERTY:

A GUIDE TO THE NEW ENERGY EFFICIENCY REGULATIONS 2015

 The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 were passed through Parliament in March 2015 as part of the Government’s strategy to meet climate change targets and will affect both domestic and commercial private rented property.

What do the changes mean to Landlords?

Minimum Energy Efficiency Standards (MEES)
From 1st April 2018 all rented property (both domestic and non-domestic) must have a minimum EPC rating of “E”.  The Regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018.  All existing domestic tenancies will fall under the Regulations from 1st April 2020 and existing non-domestic leases from 1st April 2023.

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It will be unlawful to rent a property which breaches the requirement for a minimum “E” rating, unless there is an applicable exemption.  It is considered that listed buildings are exempt in most cases as they do not presently require an EPC under current regulations.

Otherwise, the new Regulations clearly set out three exemptions which will allow landlords to let or (later), continue to let, properties which do not meet the relevant EPC rating.

  1. Cost effectiveness

A landlord is exempt if there is no Green Deal available for the improvements recommended by an independent installer of energy efficiency improvements and it has been assessed that the recommended improvements would not pay for themselves over seven years based on energy savings in the energy bill.

  1. Third party consent

A landlord is unable to increase the energy performance rating of a property to not less than the minimum level because a third party who had the right to prevent works from being carried out without their consent, such as a lender, freeholder or sitting tenant refused to grant consent or would only grant consent subject to a condition that a landlord could not reasonably satisfy.

  1. Devaluation

MEES will not apply where a report obtained from an independent surveyor states that the energy efficiency improvements will decrease the market value of the property (or the building of which it forms part) by more than five per cent.

An exemption will last for up to five years and will need to be pre-registered on a central register for a landlord to rely on it.

Failure to comply with the Regulations will result in Landlords facing a financial penalty.

Where the breach is for less than 3 months, the fine will be:

  • for commercial property – £5,000 or 10 per cent of the rateable value
  • for residential property – £2,000

Where the breach is for more than three months, the fine will be:

  • for commercial property – £10,000 or 20 per cent of the rateable value (up to £150,000)
  • for residential property – £4,000

Tenants’ Energy Efficiency Improvements
From 1st April 2016 a tenant in a private domestic rented property will be allowed to reasonably ask their Landlord for a relevant prescribed energy efficiency improvement.  The prescribed energy improvements are those prescribed in the Schedule of The Green Deal (Qualifying Energy Improvements) Order 2012 and include items such as wall and roof insulation, secondary and replacement glazing and new boilers.

The Landlord will not be able to unreasonably refuse consent but no upfront costs should fall on the Landlord, unless the Landlord agrees to contribute.  Landlords will not be obliged to make improvements unless there is a grant under a Government or Local Authority finance initiative, Energy Company Obligation or similar.

A tenant may not make a request for energy efficiency improvements where:

  • the tenant has given notice to the landlord ending their tenancy or the tenant has been served a notice requiring possession by their landlord;
  • court action has begun related to a tenant’s failure to keep to the terms of their tenancy, for example court action relating to rent arrears.

In certain situations it would be permitted for a landlord to reasonably confuse consent to a tenant’s request, most notably where:

  • another tenant made a request within the preceding six months and the landlord complied with their request;
  • the tenant has previously asked, within a prescribed timescale, and was given permission for a Green Deal finance arrangement and the recommended measures under the Green Deal finance arrangement were installed;
  • a Green Deal provider advised that the requested improvements would have a negative impact on the fabric or structure of the building;
  • the improvement proposed is the same or substantially the same as that which the landlord proposed but which the tenant had refused or failed to respond to within the preceding six months;
  • a landlord is able to offer a counterproposal that achieves the same or improved level of energy efficiency as the request proposed by the tenant;
  • Planning permission, required for the energy efficiency improvements is not granted.

EPC HousesSummary
Samuel & Son advise all landlords to start planning for the introduction of these new regulations now.  Other than the possible financial penalties for non-compliance, your asset may be unlettable if improvements have not been made by the relevant date and lenders are likely to impose conditions on agreements to provide finance on F & G rated buildings.

Additionally landlords will potentially need to consider incorporating clauses into a tenancy agreement concerning financial and access arrangements for carrying out any energy efficiency improvements.

Please call us if you would like further information or to discuss the implications of these regulations for your specific property.

 Tel: 01435 864020.

Samuel & Son EPC Fact Sheet 2015