As from 1st April 2018 all commercial and residential properties rented out in the private rented sector must achieve an Energy Performance Certificate (EPC) minimum rating of E. These energy efficiency standards were set out in the 2015 Energy Efficiency Regulations.
The new regulations will come into force for new lets and renewals of tenancies from 1st April 2018 and for all existing tenancies from 1st April 2020.
Commercial and residential lawyer Vili Chung from Tallents Solicitors in Mansfield considers the implications of the energy efficiency standards for landlords.
Civil penalties of up to £5,000 for breaches of the regulations
From 1st April 2018, landlords will be prohibited from renting out any domestic private property which does not meet the minimum EPC rating, unless the property is subject to an exemption.
Landlords now have just under two years to ensure that energy efficiency improvements are made to any properties they are renting out to bring their EPC rating up to E.
Otherwise, the local authority can impose a civil penalty of up to £5,000 for breaches of the regulations.”
What energy efficiency improvements are required?
Under the regulations, landlords will only have to undertake improvements that are appropriate, permissible and cost-effective within the Green Deal’s ‘golden rule’, i.e. in that they involve no up-front costs or are cost-effective over a seven-year payback period.
Property exemptions for the energy efficiency standards
The property will be eligible for an exemption if:
- – The landlord has carried out improvements that are cost-effective but the property still remains below an ‘E’ rating
- – The improvement works cannot be carried out without an up-front cost
- – The work needed to bring the property up to an ‘E’ rating would result in more than a 5% reduction in the value of the property (this requires evidence from a qualified independent surveyor, such as a valuer from the Royal Institution of Chartered Surveyors)
- – Third-party consent for the work cannot be obtained.
Landlords – review your property portfolio now
Tallents Solicitors is urging landlords who have properties with energy efficiency ratings of ‘F’ or ‘G’, to review them now and come up with an energy-efficiency improvement strategy to prevent them being unmarketable from April 2018.”
There is another important consideration for landlords who’re thinking about expanding their property portfolio; we would also urge you to carefully check the EPC rating of any properties you are considering the purchase of, as you will be responsible for making an energy-efficiency improvements required to bring them in line by April 2018. You should factor these costs into your purchasing budgets.