Energy efficiency: what should landlords do?
Properties with an energy performance certificate (EPC) rating of F or G are classified as 'sub-standard' under the Minimum Energy Efficiency Standards (MEES) Regulations.
From 1 April 2018, landlords will not be able to grant a new tenancy (this includes extensions or renewals of existing tenancies) of sub-standard property. From 1 April 2020, tenancies of sub-standard residential properties will not be able to continue.
So what can landlords do now?
- Carry out energy efficiency upgrade works to a sub-standard property, such as replacing single glazing or wall insulation. This is subject to the "no cost to landlord" principle (although this is currently under consultation by BEIS – see below).
- Identify a potential exclusion. Sub-market rented and shared ownership properties owned by housing associations are specifically excluded but market rented dwellings or properties which are managed, rather than owned, by an RP are caught (although the duties under the MEES Regulations are requirements of the landlord). Properties owned by non RP group members will also be caught.
- Consider specific exemptions. Exemptions must be registered on the "PRS Exemptions Register" and include cases where:
- the landlord has made all the relevant energy efficiency improvements for the property; there are no relevant energy efficiency improvements; the landlord has not been able to obtain consent; and the relevant energy efficiency improvements would reduce the market value of the property.
MEES enforcement will be through local trading standards with powers to fine non-compliant landlords. In addition, there are potential reputational issues for those in breach through the proposed 'naming and shaming' on the publicly accessible part of the PRS Exemptions Register.
Consultation – removal of "no cost to landlord"
One of the key principles behind the MEES Regulations for the private rented sector has been that any improvements should be "at no cost to the landlord".
The Government is currently consulting on changing this to a "landlord funding contribution" component. The proposal is to impose a cap of £2,500 (inclusive of VAT and any third party funding for energy efficiency improvements e.g. ECO or Green Deal) where the property is sub-standard (i.e. below an EPC E rating).
The Government is still looking for ways to drive efficiency on existing stock. Its Clean Growth Strategy aims for all properties to be Band C by 2030. BEIS says that introducing the new cap will ensure that energy efficiency improvements are carried out even where Green Deal finance, Pay As You Save (PAYS) finance, Supplier Obligation funding, and other funding options are not available.
Government figures suggest that 280,000 properties are "sub-standard". 30% of them will move to Band E if the works are done within the cap of £2,500, leaving 70% still sub-standard. There has been discussion in the sector about whether or not the cap is high enough or whether this will drive the efficiencies needed.