Minimum Energy Efficiency Standards 07391 919 820

Overview

As from the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to normally have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. A civil penalty of up to £4,000 will be imposed for breaches. This guidance summarises the regulations. There are separate regulations effective from 1st April 2016 under which a tenant can apply for consent to carry out energy efficiency improvements in privately rented properties.

Scope

The Regulations apply to domestic private rented sector properties in England and Wales. This means –

  • Properties let under an assured tenancy or a shorthold.
  • A tenancy which is a regulated tenancy for the purposes of the Rent Acts.
  • Properties let
    (a) On a tenancy which is an assured agricultural occupancy
    (b) On a protected tenancy under the Rent Act 1976
    (c) On a statutory tenancy under that Act.

Need for an EPC

  • Properties within scope will include any domestic privately rented property which: has an EPC, and is either (i) required to have an EPC; or (ii) is within a larger unit which itself is required to have an EPC, either at point of sale, or point of let. No changes are made to existing regulations regarding the provision of EPCs.
  • Flats and houses are subject to the regulations. In the case of flats this means self-contained unit. Non self-contained units such as bedsits do not require an individual EPC.
  • If a property does not have an EPC then the regulations do not apply.

The EPC must be the current EPC if there is one and this must be no more than 10 years old.

Properties within scope

Properties within scope will include any domestic privately rented property which: has an EPC, and is either (i) required to have an EPC; or (ii) is within a larger unit which itself is required to have an EPC, either at point of sale, or point of let. No changes are made to existing regulations regarding the provision of EPCs.

Flats and bedsits

  • Flats and houses are subject to the regulations. In the case of flats this means self-contained unit. Non self-contained units such as bedsits do not require an individual EPC.
  • If a bedsit is within a property that does have an EPC, then the Regulations will need to be complied with before the bedsit can be rented out. Although as such bedsits do not need an EPC if the house containing the bedsit has been sold for example it will have an EPC in which case the Regulations will apply.

Buildings excluded from scope of requirements

The following domestic buildings are excluded from the scope of the requirements:

  • Buildings and monuments officially protected as part of a designated environment or because of their special architectural historical merit insofar as requirements with certain energy efficiency requirements would unacceptably alter their character or appearance. This includes listed buildings.
  • Temporary buildings with a planned timed use of 2 years or less.
  • Residential buildings which are intended to be used less than 4 months of the year.
  • Stand alone buildings with a total usable floor area of less than 50 square meters.

Listed buildings etc

The extent of the exclusion of listed buildings from the scope of the requirements is unclear. Likewise, in the case of dwellings located within conservation areas. The Regulations state that this exemption is “insofar as compliance with certain minimum energy efficiency requirements which would unacceptably alter their character or appearance”. This exemption is based on a similarly worded exemption from the need to obtain an EPC. Clearly, if a listed building or dwelling within a conservation area does not have an EPC then the Regulations do not apply because only the existence of an EPC triggers the need to comply with the minimum standards. There is a widely held view that all listed buildings are exempt from the need to obtain an EPC, even if they are sold or let out, but, again, the exact scope of this exemption is not clear. The RLA has prepared a more detailed note on this complex subject.

Improvements which can be required

Improvement work which can be required is any energy efficiency improvement work which qualified for Green Deal and the installation of gas for an off gas property so long as the mains are within 23 metres from the property. A list of eligible improvements appears below.

So long as the minimum E rating is obtained, it is left to the landlord to choose which works need to be carried out. Obviously there is nothing to stop a higher rating being achieved.

Prohibition on letting

A domestic private rented sector property is substandard if the EPC rating is F or G, unless an exemption applies. The legislation prohibits a landlord from letting out a substandard property. If there is an EPC in place which shows that the property is an F or G then it must not be let; otherwise the landlord is liable to penalties. This is subject to any available exemptions. Energy efficiency improvements must be carried out to bring the property up to an E rating at the minimum, unless one of the exemptions is applicable. In particular, if the work cannot be carried out so as to meet the Green Deal Golden Rule then there is potentially an exemption. Under the Golden Rule there should be no upfront costs (or any net cost to the landlord) because savings resulting from the works should repay their cost over the expected lifetime of the works.

If a landlord lets and continues to let the property in breach of the regulations, however, the breach does not affect the validity or legality of the tenancy itself, so the rent still continues to be payable.

Exemptions, restrictions on making improvements

Only appropriate, permissible and cost-effective improvements are required under the regulations. Landlords will be eligible for an exemption from reaching the minimum standard where they can provide evidence that one of the following applies:

  • They have undertaken those improvements that are cost-effective but remain below an E EPC rating. Cost-effective measures are those improvements that are capable of being installed within the Green Deal's Golden Rule. This ensures that landlords will not face upfront or net costs for the improvement works.
  • They are unable to install those improvements that are cost-effective without upfront costs because the funding entails Green Deal Finance, and they or their tenant fail the relevant credit checks.
  • The landlord is required by a contractual or legislative obligation to obtain a third party's consent or permission to undertake relevant improvements relating to the minimum standard, and such consent was denied, or was provided with unreasonable conditions.
  • The landlord requires consent, and the occupying tenant withholds that consent.
  • Measures required to improve the property are evidenced by a suitably qualified independent surveyor, for example from the Royal Institution of Chartered Surveyors (RICS), as expected to cause a capital devaluation of the property of more than 5%. Only those measures that are expected to cause such devaluation would be exempt from installation.
  • There will be no requirement to install wall insulation under the regulations where the landlord has obtained a written opinion, from a suitably qualified person or from the independent installer engaged to install the measure, advising that it is not an appropriate improvement due to its potential negative impact on the fabric or structure of the property (or the building of which it is part).

Registration of exemptions

All exemptions will be required to be notified to the PRS Exemptions Register which will be operated by the Government. It is planned that this will open from 1st October 2017. It will be essentially a database of exemptions and will be open to public inspection. Failure to register any exemption will render the exemption ineffective, and will amount to non-compliance with the regulations. The Enforcement Authority will be entitled to require landlords to furnish them with evidence supporting a claim for an exemption. Landlords will also be in breach of the regulations if they claim an exemption to which they are not properly entitled.

Duration of exemption

Exemptions will only endure for 5 years. They will then need to be reviewed to see if they are still effective. If not the work will have to be carried out.

Implementation

  • From 1 April 2018, the regulations will apply on the granting of:
    • A new tenancy to a new tenant, and
    • A new tenancy to an existing tenant, i.e. any extension or renewal to an existing tenant. This includes a statutory periodic tenancy which comes into existence at the end of the fixed term shorthold.
  • From 1 April 2020, the regulations will apply to all privately rented property in scope of the regulations.
  • Where a lease is granted involuntarily by a landlord, for instance due to operation of law, they may be provided with six months to comply after the tenancy is agreed. Similarly, where a non-compliant property occupied by a tenant is sold, or is transferred to a lender in the event of landlord's default (e.g. if a receiver is appointed), the new landlord will have six months to improve the property, or seek to demonstrate an exemption applies.

Note: the Regulations actually come into force on 1st October 2016. This is purely for the purpose of allowing landlords to claim exemptions early so that they had their exemption claim in place prior to implementation on 1st April 2018.

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