The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 come into force on April 1st 2018, and will impose new obligations on private landlords.
The regulations require any privately rented properties to have a minimum energy performance rating of ‘E’ on an Energy Performance Certificate (EPC), provided that the property is legally required to have an EPC.
The regulations will apply to new domestic tenancies and renewals from April 1st 2018, but landlords have until April 1st 2020 to make the relevant changes for existing tenancies.
An EPC will give an energy performance rating between A – G. A rating of ‘A’ indicates a highly efficient property, whilst ‘G’ is the least efficient rating. Once issued, an EPC certificate will be valid for 10 years.
Local Authorities can impose a fine of up to £5000, per property, per breach for landlords found to be in breach of the regulations. This means that a landlord can be fined £5000 for a property which does not comply upon each new tenancy. Low EPC ratings indicate properties which are wasting energy and therefore increase the tenants’ energy bills.
Government guidance on the regulations, (here), states that increasing the energy efficiency of the private rental market will:
- Assist with energy costs,
- Improve the condition of rental properties,
- Reduce maintenance costs,
- Smooth seasonal peaks in energy demand,
- Reduce greenhouse gas emissions.
The average annual cost of energy for a ‘G’ rated property is approximately £1150 more than for an ‘E’ rated property. The regulations should mean significant savings for many tenants, including vulnerable tenants.
The regulations do not just mean additional costs for landlords. A report conducted by Sustainable Homes (here) in 2016 found that improving the energy efficiency of rental properties benefits landlords by:
- Reducing the period that properties are left without tenants,
- Reducing rent arrears,
- Increase in property market value.
Making the necessary changes to increase the property’s rating does not necessarily need to be an expensive activity. Small changes all contribute to increasing the rating of a property, and funding may be available to landlords in some circumstances, for example, through the Green Deal, or other funding scheme.
A landlord is only required to make the improvements if they can do so at no cost to themselves. If they cannot carry out the works under one of the relevant schemes, they can apply for an exemption to the requirement. Advice on funding can be obtained from the Energy Savings Advice Service on 0300 123 1234.
In light of the new regulations, our top tips for landlords are
Look into Funding
As mentioned above, there are numerous benefits to landlords for making the changes, and the works shouldn’t leave you out of pocket. Look into the following funding sources:
- The Green Deal,
- ECO Help to Heat Funding,
- Local Authority Grants.
Think about interim measures
Small changes can make a big difference. Some of the main ways to improve energy efficiency include:
- Replacing light bulbs with energy efficient LED’s,
- Installing new insulation in lofts and wall cavities,
- Replacing a boiler for a more efficient version,
- Replacing old windows and doors with new double glazing.
Check if any exemptions apply
If the building is not required to have an EPC, or if the property has not been subject to a relevant new tenancy or renewal, then no action is required.
If neither of the above apply, there may still be a relevant exemption which removes the requirement to upgrade, for example, if the works cannot be carried out at no cost to the landlord, or if there are no relevant improvements which can be made. It is important to note, though, that any exemptions which are relied upon should be registered on the PRS Exemptions Register, which will be open to the public, and any exemptions will cease upon the end of the current tenancy.
If you have any queries, or need any advice on any matters above, please contact our Commercial Property or Residential Property Teams who will be happy to assist. Call to speak to one of our team on 0115 9888 777.