Landlords! New Energy Efficiency Standards Could Mean Your Properties Are No Longer Legal To Let!.
Genuine question for landlords in Redbridge… how many are aware of an important item of legislation that came into force on 1st April 2018, and which applies to any domestic privately rented property? Those who don’t know or aren’t sure should read this now and avoid the potential risk of incurring a penalty of up to £4,000 imposed for up to a 3 months breach of the Regulations…
Under The Minimum Energy Efficiency Standard (MEES), from the first day of April a landlord can no longer supply a letting to new or existing tenants in a privately rented property that has an Energy Performance Certificate (EPC) rated below ‘E’. An estimated 1 in 10 properties in England and Wales may fail to meet the new energy performance standards, according to recent press reports.
New legislation – to be rolled out in 3 stages over 5 years
Property management agents should have made their landlords aware of the new legislation – to be rolled out in 3 stages over 5 years – which started as a voluntary scheme on 1st April 2016. This meant that all domestic tenants were given the right to request energy efficiency improvements to their properties, which Landlords could not refuse to consent.
At this 2nd stage, it is now unlawful to grant new leases to residential or commercial property with only a current EPC rating of ‘F’ and ‘G’. From 1st April 2020, the regulation will also apply to all residential privately rented property required to have an EPC, and be extended further in 2023 to include all existing commercial leases.
Typical exemptions where an EPC is not required
The MEES regulations apply to a domestic property, defined in section 42 of the Energy Act 2011 as properties let under an Assured Tenancy (Housing Act 1998), or a Regulated Tenancy (Rent Act 1977). There are a few exemptions where an EPC is not required – and it can be demonstrated that the building is one of the following:
- A ‘listed’ building or officially protected property – which would be “unacceptably altered” by MEES – but not necessarily exempt from an EPC.
- Holiday accommodation – rented out for less than 4 months a year or let under a licence to occupy.
- An individual, non self-contained unit – e.g. a bedsit or room within a HMO (House of Multiple Occupation).
- Intended to be used for less than 4 months in a year.
- Due to be demolished.
If a home is more efficient, the fuel bills will cost less
The energy efficiency of a property is graded from A to G and also numbered from 1 – 100, where a higher number signifies the property is more efficient, and the fuel bills will cost less. Where the lowest rating – F and G – are numbered between 1 and 38, the new statutory Band E rating is 39 to 54. The average energy efficiency rating for a dwelling in England Wales is Band D (55-68).
Areas of a property which can directly affect efficiency performance, and which are assessed and rated on an EPC include the walls, roof and floor, windows, main heating and controls, secondary heating, hot water and lighting.
Where a property is in breach of regulations
Landlords are required to undertake work to improve the energy performance of the property or face heavy penalties. Each local authority is granted powers under the Energy Efficiency (Private Rented Property) Regulations 2015 to enforce the Regulations. They can also set out the maximum level of fines/penalties that can be levied for the period of time, as follows:
- Up to three months – up to £2,000
- Three months or more – up to £4,000
There is a maximum level of penalty applied to each property, which is set at £5,000.
The good news is that it appears that landlords have been responding to tenants’ demands for better quality and better insulated homes over the last few years, according to ARLA Propertymark*. Despite the number of properties rated as only an F or G having fallen from around 700,000 in 2012, to 300,000 today, there could still be around 400,000 properties, which may no longer be legally acceptable for letting. (*ARLA Propertymark is the unified professional membership organisation for ARLA, NAEA, NAVA, ICBA, APIP and NFoPP Awarding Body, as of February 2017).
The Green Deal
Landlords who hold an Energy Performance Certificate (EPC) for a property rated below E but want to avoid penalty fines are obliged by law to ensure that that the energy efficiency improvements are met. The cost of the improvements can be finance by Local authority improvement grants and the Green Deal, recently reinstated.
The Green Deal, which provides loans for energy-efficient home improvements and originally ran from 2013 to 2015, opened again in 2017 to offer loans for selected energy efficient home improvements, such as:
- Solid wall, cavity wall and loft insulation
- Draught-proofing and double glazing
- Renewable energy generation, such as solar panels or heat pumps
A property management agent might also advise a landlord of further key benefits of an energy-efficient property, such as being void for 30 per cent less period of time and potentially increasing its market value.
