By aiming for higher than the minimum Energy Performance Certificate (EPC) “E” rating when improving their privately rented homes, landlords will not only improve the energy efficiency of their rentals, adding to the comfort and reducing the heating bills for their tenants, they will save time and money in the long run, as the current standards are under review.
Following an EU Directive, The Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 established the new Minimum Energy Efficiency Standards known as (MEES) in the residential and commercial private rented sector.
The built environment was identified by governments as a major contributor to Greenhouse Gas (GHG) emissions and thus poses a threat to the UK meeting its carbon reduction targets for 2020 and 2050. The UK Government estimates that 18 per cent of commercial properties hold the lowest EPC ratings of F or G. While Building Regulations ensure that new properties meet current energy efficiency standards, MEES tackle the UK’s older buildings over a period of transition time.
Plans are already afoot to raise the minimum standards.
Which Properties are affected?
Establishing which buildings and tenancies are caught within the scope of MEES is not always straightforward. There are a number of exceptions to those buildings which require an EPC:
- industrial sites, workshops, non-residential agricultural buildings with a low energy demand, certain listed buildings, temporary properties and holidays lets
- tenancies of less than 6 months (with no renewals)
- tenancies of over 99 years.
Determining whether buildings and tenancies are within scope requires owners to look at two sets of regulations: Energy Performance of Buildings (England and Wales) 2012 and the MEES Regulations. The interplay of these regulations is complex and creates some potential loopholes.
The regulations apply to both domestic and commercial buildings and their provisions introduced some significant changes:
- A landlord of a domestic property cannot unreasonably withhold consent to a tenant who wants to make an energy efficient improvement at its own cost. This provision applies even though the tenancy agreement may state the tenant is not to carry out any alterations.
- They prevent landlords from letting property where the EPC rating is ‘F’ or lower where:
- from 1 April 2018, the landlord of either domestic or commercial property wants to grant a new lease or renew or extend an existing lease;
- from 1 April 2020, the landlord of domestic property has an existing lease in place;
- from 1 April 2023, the landlord of commercial property has an existing lease in place.
There is no requirement for a landlord to take improvement action to a property unless the property is let to a tenant, but it must currently meet the minimum “E” rating before it can be marketed to let.
The Future is uncertain
As the regulations originated through EU directives, the Regulations applying in the UK after Brexit could yet see amendments, however it is thought more likely that any changes will be to strengthen rather than relax their impact.
What are the implications for landlords?
There are some issues which may need to be addressed in legislation in the future which involve the implications for landlords:
- Giving landlords a right of entry to carry out energy efficient improvements and to install meters to monitor energy performance;
- Restricting the ability of tenants to make alterations where these might negatively impact on the energy efficiency;
- Preventing tenants from commissioning a new EPC or an obligation on the tenant to advise the landlord of any new EPC obtained;
- Putting an obligation on tenants to reimburse landlords for the cost of energy efficient works carried out by the landlord;
- Putting an obligation on tenants to carry out works to stop the properties failing to meet the minimum EPC standards.
A new consultation
Strutt & Parker surveyor Yasmin Peach writing in The Farmers Weekly has said that the government is already considering a further tightening of the rules – “The government recently published a consultation seeking views on raising the minimum EPC rating from an E to a C from 1 April 2025.”
This it is said would apply to new tenancies and for all tenancies by 2028. Although this move is still only a proposal, it is easy to see the direction of travel on energy performance standards, especially given the current new impetus behind the thinking following the US election and the climate change conference to be hosted by the UK next year – The UK will host the 26th UN Climate Change Conference in Glasgow on 1 – 12 November 2021. The climate talks will bring together heads of state, climate experts and campaigners to agree coordinated action to tackle climate change for the future.
With Green Homes grants currently available, landlords are being advised to take a longer term view on their let properties’ energy efficiency needs. Rather than aiming to enhance properties to meet the minimum “E” rating, landlords should perhaps consider carrying out what work that would meet a “C” rating instead.
The government consultation – Improving the energy performance of privately rented homes – runs until the 30th December 2020. It has suggested prioritising improvements to the fabric of buildings for energy efficiency using better insulation and draught-proofing. Improvements to the heat and electricity generation systems would be secondary considerations.
The consultation exercise is also proposing increasing the maximum amount a landlord would be expected to invest to reach higher energy efficiency standards. To make the necessary improvements they are currently expected to invest up to £3,500, this figure could be raised to £10,000 including VAT.