Recently, new legislation has been passed that will make it easier for tenants to rent more energy efficient properties. Hosking Associates Ltd Environmental Consultant, Liz Ainslie MsC AIEMA discusses.
Called the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, the regulation introduces measures to improve the energy efficiency of rented properties in England and Wales. Both domestic and non-domestic private rented property is included in this legislation.
The regulations are the first instruments to be made using the powers conferred by the Energy Act 2011. The Act places a statutory duty on the Secretary of State to make regulations implementing the tenants’ energy efficiency improvements provisions by 1st April 2016.
The property industry will be required to review the legislation carefully and take the regulations into account now, with start and enforcement dates beginning in the autumn of next year. The dates are intended to be rolled out in phased stages.
What are the regulations?
The new regulation states that from 1 October 2016, all private rented properties must have a minimum energy performance certificate of band ‘E’. Landlords will not be able to take on new tenancies after this date without making energy improvements. Then, after 1 October 2018, for any domestic property below an E rating, these regulations will apply to all existing tenancies. This date is 1 October 2023 for non-domestic properties.
By making the regulations clear well ahead of their application date, and by phasing in requirements over time, all participants will have time to take voluntary action, reduce their costs of complying, and decrease the need for enforcement of the legislation.
Who must comply?
All buildings requiring an EPC will be part of the legislation. Therefore, buildings due to be demolished, used as a place of worship, listed buildings, or other exemptions do not have to comply. However, there are the minor exceptions to the rule.
Currently, around 20% of non-domestic property with an EPC is rated ‘F’ or ‘G’. Those landlords in possession of such buildings will need to take into account financial and reputational loss when their non-compliant property is valued. Lenders will most likely have greater focus on the energy rating of a building when the legislation is implemented, and they may require borrowers to bring properties up to standards before any money is released.
What happens if I don’t?
It makes sense to begin upgrading your property now if you fall into the ‘F’ or ‘G’ ratings. You will save money in energy bills in the long term, thereby making your property more attractive to lease. There are many Green Deal options out there to help your business become more energy efficient without costing you a fortune up front.
Local Authorities will enforce the regulations for domestic properties, while non-domestic properties will most likely be enforced by Trading Standards. The penalties for a breach of compliance are civil, not criminal. There could be a financial penalty, a publication penalty, or both. Penalties will range from £1,000 for giving false or misleading information on a domestic property, up to 20% of the value of a non-domestic property for failure to comply.
Domestic tenants will benefit, too
This legislation will be a boon for domestic tenants who are so often overlooked by legislation. From 1 April 2016, domestic tenants will have the power to request the landlord’s consent to energy efficiency improvements which require no up-front or net cost to the landlord. It even places a duty on the landlord not to unreasonably withhold consent.
This is great news for all tenants, in that poorly performing buildings won’t put such a strain on tenant’s energy bills going forward. It is especially good for the domestic market. Tenants often have very little choice around their energy usage in older or less-well-maintained properties, and landlords have been slow to respond to the voluntary approaches to energy savings in the past.
However, in practice this means that landlords still can wait for another three years before making any improvements. Also, while an ‘E’ rating is acceptable, the legislation doesn’t go far enough in ensuring that buildings are as energy efficient as possible. The UK has commitments under the Climate Change Act 2008 to reduce greenhouse gas emissions. Domestic and non-domestic buildings account for around 37% of the UK’s total carbon emissions (as at 2009 figures) – landlords could play a huge part in this reduction.