The current minimum level of energy efficiency required for a property to be privately rented is set out by the Energy Efficiency Regulations of 2015. The efficiency of a given property is detailed in its Energy Performance Certificate (EPC) using a ranking that grades properties A-G. An A grade indicates minimal energy use and CO2 emissions, while a G grade indicates the opposite. Every property in the UK (not including listed buildings, places of worship, temporary buildings, worksite buildings, and other important or infrequently used properties) legally requires an EPC. These certificates are produced by accredited assessors and they remain valid for 10 years before needing renewal. Those properties without a valid EPC will be penalised accordingly.
Ultimately, the role of Minimum Energy Efficiency Standards (MEES) is to help our government reach carbon reduction targets – i.e. the aim to reduce the CO2 emissions from all buildings to near zero by 2050. Such targets mean higher EPC grades on all domestic and non-domestic properties in the UK. So by moving the goalposts on which EPC grades are required for landlords to legally renew or grant tenancies, changes to the MEES can improve the overall efficiency of the UK’s rented property market as a whole.
So what exactly are the new changes set out in the regulations?
What will change in April 2018?
By the end of 2015, 22% of domestic properties in the UK had an EPC rating of E or below, while for non-domestic properties the amount reached 28%. Such figures prompted some drastic changes to the way our government deals with properties that are underperforming in terms of energy efficiency. As such, the recent 2015 regulations set the new minimum level of energy efficiency for both domestic and non-domestic properties at grade E on the EPC scale. So from April 2018, landlords with properties rated F or G will required by law to improve their energy efficiency to an E grade or above or else face civil penalties. And from April 2023, landlords will not be legally permitted to let commercial properties with an EPC rating below E.
How can you improve your EPC rating?
Those who fail to meet the new changes to energy efficiency standards will be required to improve their EPC rating before applying for a new certificate. But don’t worry too much, as attaining the level of efficiency required for an E grade is generally achievable with a few steps. Government guidance documents set out a number of ‘relevant energy efficient improvements’ that landlords can undertake to help bring their properties in line with the new regulations. Necessary improvements to substandard properties may include:
- Retaining heat in your property by padding out walls and lofts with insulating materials.
- Further improving insulation by upgrading single-glazed windows with double glazing.
- Updating all white goods (fridge, freezer, dryer, etc.) to more energy efficient models.
- Replacing the old boiler in your property with a more efficient condensing model.
- Installing LED or CFL light bulbs in the place of traditional incandescent bulbs.
(Note: for a more detailed guide on achieving an energy efficient home and improving your EPC, check out our previous post here on the James Anderson blog.)
What happens if you fail to meet the requirements?
Since local authorities will be tracking your property and ensuring that it meets the required energy efficient standards, it is imperative that you increase your EPC rating before April. However, landlords who let properties that fall short of the requirements without good reason may be faced with penalties until they meet the minimum energy efficient standards.
Commercial properties suspected of not meeting the energy efficiency standards will first be sent a compliance notice requesting vital information such as EPCs and tenancy agreements. These documents will be used to determine whether the landlord is in breach of regulations. Landlords found to be in breach of regulations or non compliant with notices will either be issued a financial penalty, a publication penalty, or both.
Financial penalties mean that the landlord will be required to pay a fine relative to their breach, whereas publication penalties mean that the local authority will publish details of the landlord’s breach on the PRS exemptions register (available for the public to view for at least 12 months). The nature and severity of the penalty depends on the details of the infringement itself:
- Renting out a property that has been in breach of energy efficiency regulations for less than three months will result in a fine of up to £2,000 and/or a publication penalty.
- Renting out a property that has been in breach of energy efficiency regulations for three months or more will result in a fine of up to £4,000 and/or a publication penalty.
- Providing information about a property on the PRS Exemptions Register that is false or misleading will result in a fine of up to £1,000 and/or a publication penalty.
- Failing to follow up or comply with a compliance notice will result in a fine of up to £2,000 and/or a publication penalty.
Landlords may appeal penalties they have been given by taking them to the First-tier Tribunal for review within 28 days of the local authority’s decision to issue the penalty.
Exemptions to the new energy efficiency regulations
There are some properties which do not meet the new standards with good reason and are therefore exempt from penalties. Such exemptions to the 2015 regulations may be granted in cases such as those when:
- The property remains below the EPC grade E even though all of the relevant energy efficiency improvements have been made or there are no such improvements that can be made in the first place (e.g. the building is incompatible with certain improvements).
- The recommended improvements to energy efficiency cannot be financed at no cost to the landlord because the costs are too high (e.g. the landlord cannot attain funding that covers the entire cost of a new boiler and cannot cover the excess cost themselves).
- The property is not suitable for certain wall insulation systems due to its potential impact on the integrity of the property (as proven by an independent conservation expert or an independent installer of the insulation system in question).
- The market value of the property would be reduced by more than 5% upon the installation of recommended energy efficiency measures (as proven by an independent surveyor from the RICS register of valuers).
- The landlord cannot undergo certain improvements due to a lack of third party consent from the local authorities, mortgage lenders, superior landlords, or current tenants (where they can demonstrate a reasonable amount of effort in seeking this consent).
- The landlord has only recently taken hold of a property due to a sudden change of circumstances and expecting them to undergo the relevant energy efficiency measures would be unreasonable (e.g. the lease is granted under contractual obligation).
If you are a UK landlord currently looking to purchase a new property in South West London, feel free to check out the sales we currently have available or have a chat with a member of the James Anderson team. We’d be more than happy to help you out!