Landlords are being urged to comply with updated regulations in relation to minimum energy efficiency standards (MEES).
Since April this year, new rules apply to energy ratings which affect a landlord’s ability to agree a new letting or tenancy.
They now have to contribute up to £3,500 per property towards raising the rating on a domestic property above an E grade EPC assessment – previously there was a ‘no cost to the landlord’ exemption although the grading of F/G had been barred from rental agreements under 2018 legislation.
From April 1st next year, the E or above regulation will apply to all tenancies, old and new.
For existing properties, where the “no costs to the landlord” exemption applies, they will remain on the exemptions register until 31st March 2020, when they will also be removed and thereafter Landlords will have to contribute up to £3,500 for improvements.
If the costs of making improvements to a sub-standard property are above £3,500, and the Landlord can evidence this with three separate quotes, then the Landlord can apply for an exemption for any cost over the £3,500 cap. If a Landlord has made any energy improvements since 1st October 2017 (up to 31st March 2019) then those costs can be deducted from the £3,500 cap.
If a Landlord has already registered for an exemption (i.e. where a tenant has not consented to improvements being made), then the Landlord will not be able to rely on that exemption once that particular tenancy has ended.
A note from the Residential Landlords’ Association says if a residential building is exempt from the requirement to have an energy performance certificate when it is rented out (or sold) then this minimum E rating standard does not apply. For listed buildings and those in conservation areas, this exemption status is crucial, as many of these properties will be incapable of reaching that level due to the nature of the building/area. An exemption from MEES requirements when they are rented out (or sold) would allow the landlord to continue to rent out these properties. ‘The problem though, is that the legislation is not clear,’says the Association.
Since the EPC was introduced, the general understanding has been that listed buildings are exempt. However, this question hinges on the interpretation of the relevant EU Directive which the RLA says is ‘badly drafted and unclear so the general understanding may not be safe to follow’. The Eu directive will remain in force even after Brexit until such time as the UK decides to alter it.
What the exemption from having to have an EPC says is that buildings protected as part of the designated environment or because of their special architectural or historical merit are exempt from the requirement to obtain an EPC “insofar as compliance with minimum energy performance requirements would unacceptably alter their character or appearance”.
The RLA says: ‘If this condition is met the property would be exempt from the minimum E rating requirement but what does this condition actually mean for landlords? It means that if the property is exempt from the obligation to have an energy performance certificate, even if one was in place it would be treated as being obtained voluntarily; not as a requirement despite the property being rented out (or sold). As such, an F rated property that is exempt would still be sellable or rentable. It is only where there has been a letting (or sale) AND there is a legal requirement for an EPC to be in place where the property must meet the minimum E rating on the energy performance certificate. In addition, while a landlord can be penalised for not having an EPC they can still rent out the property, though they face penalties for not having an EPC. The penalties for not having an EPC are significantly less than the penalties for renting out and F or G rated property when you are required to have an energy performance certificate however.’
The inference is if an EPC is not required, then the MEES requirements would not apply either. These provisions apply to non listed buildings which are located within any conservation areas.
Guidance suggests that if there was any doubt as to whether works would unacceptably alter the character or appearance of a building, building owners should take advice of their local planning authority’s conservation officer.
The RLA’s webiste states: ‘For landlords who are concerned about the potential risk, one suggestion to consider when renting out property is to have an EPC in place and then to clarify with the local conservation officer what work recommended by the EPC is permissible and to carry out these works which the Conservation Officer will agree to in order to either attain a minimum E rating or to get as close as possible to it. You would need to obtain an EPC in this situation if you do not already have a current one.
‘There is an exemption where works are not permitted because the necessary consents cannot be obtained but this must be entered on the PRS Exemptions Register. The PRS Exemptions Register is the register where any exemption for the MEES requirement must be claimed. The exemption is not effective unless it is recorded in this register. This is one possible solution to the dilemma. Indeed, if you already have an EPC for the property, it is going to be difficult to decide whether or not it was actually required in the first place so you are quite possibly subject to the MEES requirements already.
‘Landlords will have to assess the level of risk they wish to take when dealing with these type of properties.’
Syntegra conducts MEES compliant energy audits and can advise on cost-effective ways to make properties achieve a grade A-E to satisfy the lettings criteria.
MD Alan King said: ‘These regulations are now well-established so there is no excuse for landlords not being aware of them or acting to comply with them. Quite simply, if their properties don’t make the grade, they can’t be let. Most alterations required to bring a property in line with the appropriate energy rating are not prohibitively expensive and will be recouped from securing new tenancy agreements whereas failure to invest in efficiency measures can be a costly error.’
The Government is now consulting on ‘how best to improve the energy performance of nondomestic private rented buildings through tighter minimum energy standards’ in a consultation running until January 2020 entitled ‘The non-domestic private rented sector minimum energy efficiency standards – the future trajectory to 2030.’
It states: ‘Continuing to improve the energy efficiency of non-domestic buildings will reduce carbon emissions and energy use, help make businesses more productive, and grow the energy efficiency market. The Government considers that amending the 2015 Non-Domestic Private Rented Sector Regulations, to set a more ambitious target, will be the most effective way to drive wide-ranging action in the rented sector by 2030. This consultation outlines two different targets – the Government could set to tighten minimum energy efficiency standards. The Government’s preferred target is that landlords of all non-domestic privately rented properties in England and Wales ensure their properties achieve a minimum energy efficiency standard of Energy Performance Certificate (EPC) band B by 2030, provided the action required is deemed cost effective by meeting a seven-year payback test.’
Details of our commercial energy audit service can be found here https://syntegragroup.com/m-and-e/services/energy-consultancy/energy-audit/
* In 2015, world leaders agreed to 17 goals for a better world by 2030. https://www.globalgoals.org/ These goals have the power to end poverty, fight inequality and stop climate change. Guided by the goals, it is now up to all of us, governments, businesses, civil society and the general public to work together to build a better future for everyone. Syntegra’s work is underpinned by many of the goals.
Global Goals 7: Affordable and Clean Energy
Renewable energy solutions are becoming cheaper, more reliable and more efficient every day. Our current reliance on fossil fuels is unsustainable and harmful to the planet, which is why we have to change the way we produce and consume energy. Implementing these new energy solutions as fast as possible is essential to counter climate change, one of the biggest threats to our own survival.
Target 7.3: Double the improvement in energy efficiency
By 2030, double the global rate of improvement in energy efficiency.