Landlords of residential property could face high fines if they do not meet the latest energy efficiency standards.
On 1st April 2020, the latest stage of the Minimum Energy Efficiency Standards was implemented, making it unlawful for landlords to continue domestic residential tenancies where the property has a rating of F or G on its Energy Performance Certificate – commonly known as an EPC, without bringing the property up to the required minimum standard, or applying for an exemption.
Two years ago, the first stage of implementation introduced the requirement for an E rating or above for all new tenancies granted. Now, that is extended to all existing domestic tenancies and, in 2023, it will be extended to all commercial tenancies. Landlords are not expected to spend more than £3,500 inclusive of VAT on energy efficiency improvements to rented properties. If improvements to the property would exceed this amount, then landlords should take steps to install improvements to the property up to that sum which would improve the energy rating and then register an exemption.
Where landlords continue to let domestic property which fails to meet a minimum E rating, enforcement action by local authorities can be implemented with the authorities being able to issue compliance notices to investigate a property. If a breach is established, then landlords could face fines of up to £5,000 depending on the period through which the property is rented during the non-compliance with the regulations. Whilst there has been little enforcement since 2018, that has been attributed to the difficulty of identifying whether property was subject to a ‘new’ or ‘existing’ tenancy; however, those in the industry consider that it is likely that enforcement will be more vigorously pursued now that all property let under a residential tenancy must comply.
As explained by property law expert Laura-Pauline Adcock-Jones “All domestic landlords need to check their property portfolios and undertake any work that is needed to increase the EPC rating or to register an exemption. There is some funding support available for landlords, and a cap on how much has to be spent, so it’s worth checking out the government’s information and guidance on how to meet the regulations.”
Exemptions may be provided where a landlord has undertaken measures recommended in the EPC report up to a cap of £3,500 including VAT but the property still does not meet the E rating. Other exemptions include wall insulation exemption which applies if the relevant improvements are cavity, external, or internal wall insulation and landlords have obtained written advice showing that these improvements would negatively impact the fabric or structure of the property. Third party consent exemptions apply where consent is required from a third party and despite best efforts this consent cannot be obtained and there is also a property devaluation exemption which is used where landlords have evidence to show that improvements would devalue the property by more than 5%, which would require a report from a surveyor confirming this. These exemptions last for 5 years.
Finally, there is a temporary exemption for those that have recently becoming a landlord. This exemption lasts for 6 months after the date upon which a person became a new landlord.
Properties listed for historic purposes are generally thought to be exempt, although it is not entirely clear from the EU Regulations and the Government’s guidance. These say that energy performance compliance may not be required if the necessary works would unacceptably alter the character or appearance of a building, but do not provide an automatic exemption. Owners are well advised to get an EPC and then ask their local conservation officer to confirm where they stand if the property does not meet the new requirements.
The Regulations also allow the tenant to undertake energy improvements if the landlord gives their consent, even where there are restrictions on making improvements in the lease. If the tenant applies for consent the landlord may only refuse on reasonable grounds.