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Property and mortages

Landlords Prepare for an Energy-Efficient New Year

Residential property

We’re now fully in the swing of the Christmas season, when our calendars become populated with long-planned lunches to eat, drink and be merry. Christmas feasting also means Christmas crackers, and Christmas crackers mean Christmas cracker jokes. Here’s one I read recently. And I apologise in advance.

I bought some energy saving lightbulbs, but I don’t think they work.

After fitting one I was just as tired as when I fit a normal one.

As awful as the joke may be (it is a Christmas cracker joke I suppose) it did provide me with a lightbulb moment of my own. It reminded me that when we’re through the festive season and into the new year, there are some changes on the horizon regarding the energy efficiency requirements for private rental properties. These have been in the pipeline since 2011, but with only a little over three months to go before the regulations come into effect it’s time for landlords to make sure they’re up to speed with the new rules.

Background

The benefits of more efficient energy use are as widely accepted as they are self-evident; as environmentally sound as they are economically shrewd. This new round of regulations aims to ensure that, as the Government points out, “tenants who most need more efficient homes, particularly vulnerable people, are able to enjoy a much better living environment and lower energy bills.” Tackling less efficient properties and the higher fuel bills they generate is part of a broader goal of reducing fuel poverty.

What are the new regulations?

From 1st April 2018 all properties rented out in the private sector in England & Wales will be required to have a minimum energy performance rating of ‘E’ on an Energy Performance Certificate (EPC).

These regulations will apply to all new lets and renewal of tenancies from 1st April 2018 and will come into effect for all existing tenancies from 1st April 2020. This means that landlords of properties with an F or G Energy Performance Certificate rating will either not be able to rent out their properties or will need to make the relevant changes to their properties now in order to meet the requirements. Any landlords found breaching the regulations could be liable to receive a fine of up to £4,000.

Who do they apply to?

The new regulations apply to all houses and flats. In the case of flats, this means those that are self-contained units that require their own individual EPC at the point of sale or letting. In the case of bedsits or other non-self-contained units, these do not require an individual EPC. However, if the bedsit is within a property that does have an Energy Performance Certificate, and this is currently at rating F or G, then this will need to be raised to E or above before the bedsit can be rented out.

Business premises are also required to meet the same minimum energy efficiency requirements but with some differences in the dates that the new regulations come into force for continuing or existing tenancies. For all non-domestic properties, such as business premises, the regulations don’t start to apply to existing tenancies until 1st April 2023. However, the date for new tenancies to abide by the new requirements is the same: 1st April 2018.

What support exists for landlords to bring properties into line?

Any alterations should probably be complete or underway by now for landlords to make the 1st April 2018 deadline for new tenancies and some may have already benefitted from the Government’s Green Deal. The initiative was launched in 2013 to allow homeowners and private landlords to make energy-saving home improvements to their properties, however the funding was withdrawn in 2015. It allowed landlords to make energy efficiency improvements without having to pay all the costs upfront as tenants repaid the cost of the measures through their energy bill savings, on a ‘Pay As You Save’ basis.

Are there any exemptions to the regulations?

A full list of exemptions can be found online, here (see chapter 4 in the domestic properties guidebook and chapter 3 in the non-domestic guidebook). Only appropriate and cost-effective improvements are required under the regulations. Some exemptions stem from restrictions on landlords from making improvements to their properties and include instances where:

  • They have undertaken those improvements that are cost-effective as defined by the Government’s Green Deal but the premises still remain below an E EPC rating.
  • They are unable to obtain funding via the Energy Company Obligation (ECO), Green Deal Finance or local authority grants.
  • The landlord requires consent, and the occupying tenant withholds that consent.
  • Measures required to improve the property are expected to cause a capital devaluation of the property of more than 5%.
  • Where the installation of wall insulation is deemed not to be an appropriate improvement due to its potential negative impact on the fabric or structure of the property.

Some temporary exemptions might also be available where someone has recently become a landlord to allow them time for work to be done. All exemptions need to be a registered on the Government’s PRS Exemptions Register. The register service is currently running as a pilot. Landlords who wish to register an exemption as part of this pilot should e-mail: [email protected]

Reviews and appeals

If a landlord receives a penalty notice from a local authority, they can request a review of the decision if they see fit. The local authority must consider his or her representations and all other circumstances of the case before making the decision whether or not to uphold the penalty or fine. After the review, if the local authority and the landlord are still at odds, the landlord can appeal the decision further. They may feel the penalty notice was issued in error, that it doesn’t comply with the regulations, or that it wasn’t appropriate to the circumstances.

Further detail on the forthcoming changes for landlords can be found in this Government booklet. If you would like to talk through your individual circumstances with a solicitor at Progeny Corporate Law, please get in touch and we’d be more than happy to help.

The content of this article is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Progeny Corporate Law Ltd accepts no responsibility for the content of any third-party website to which this article refers.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.

Author Gill Evans

Mortgage Adviser

Gill began her career in the banking industry, focusing on her preferred area of expertise: mortgage and insurance advice.

Learn more about Gill Evans

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