The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015
An Energy Performance Certificate (EPC) is required, under the Energy Performance of Buildings (England and Wales) Regulations 2012, whenever a property is built, sold or rented. The certificate contains information about the property’s energy use, typical energy costs and provides recommendations about how to reduce energy use and save money. The energy performance of a building is rated on a scale of A to G, A being highly efficient, G being low efficiency.
EPC’s apply to all private rented properties which use energy to condition the indoor climate. Services considered to condition the indoor climate include fixed heating, mechanical ventilation or air conditioning. If a building is designed or altered to be used as separate accommodation, i.e. offices, and has separate heating and ventilation more than one EPC will be required (one for each individual accommodation).
In March 2015 the government passed The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. These regulations phase in obligations for landlords of private rented domestic and non-domestic properties in relation to their energy performance.
The Regulations set the minimum energy efficiency rating for all private rented properties and make it unlawful for properties with an energy performance rating of F or G to be let. Essentially a landlord who rents a property with an EPC rating below an E will be required to undertake work to improve its energy performance.
The Regulations are being implemented in stages. Detailed below are the 4 key dates on which rights for tenants and requirements for landlords are enforced.
On 1st April 2016 parts 1 and 2 of the Regulations came into force imposing a new right for tenants of domestic private rented property. Tenants can now request consent from their landlords to install energy efficiency improvement in the property they rent. The tenant is required to secure suitable funding for the requested improvements, and, if no exemptions apply, the landlord cannot unreasonably refuse consent.
From 1st April 2018, a landlord of a private rented property with an EPC rating of F or G must not grant a new lease or renew an existing lease of that property until works have been carried out to improve the energy efficiency to a rating of E or above.
From 1st April 2020, a landlord of a domestic private rented property with an EPC rating of F or G must not continue to let the property until works have been carried out to improve the energy efficiency rating to an E or above.
From 1st April 2023, a landlord of a non-domestic private rented property with an EPC rating of F or G must not continue to let the property until works have been carried out to improve the energy efficiency rating to an E or above.
Landlords will be exempt from meeting the minimum standard if they can demonstrate one of the following:
- All cost effective improvement works that have a simple payback period of seven years or less have been undertaken. These works include fabric improvements, replacing inefficient mechanical and electrical services installations and the installation of renewable technologies.
- The Green Deal Golden Rule applies, where the cost of the improvement works exceeds the value of the total energy savings over a maximum investment period of 25 years. This only applies when a Green Deal Installer has carried out the improvements.
- A landlord is unable to obtain the necessary consent to install the required energy efficiency improvements, for example from the tenants, planning authority, lender, superior landlords, etc.
- An independent surveyor determines that the improvement works would reduce the property’s value by 5% or more, or could cause damage to the property.
- A relevant suitably qualified expert provides written advice that the measures will reduce a property’s value by 5% or more, or that wall insulation required to improve the property will damage the property.
Although the Regulations do not directly mention that listed buildings are exempt from meeting the minimum standard, they do refer back to the Planning (Listed Buildings and Conservation Areas) Act 1990. The Act states that in order to carry out improvements on a listed building third party consent is needed e.g. you will need to put forward the proposed upgrades to the Local Authority for approval. If the third party refuses the upgrades, or the conditions they set can’t be reasonably met, then the building will be exempt from having to make the changes.
Where a landlord considers an exemption applies allowing them to let their property below an ‘E’ EPC rating, the landlord will have to log this on a centralised register ‘ the Private Rented Sector (PRS) Exemptions Register. Exemptions last for five years.
Penalties for non-compliance
Landlords that rent out a property with an EPC rating below an E after the relevant parts of these Regulations come into force could be fined between £2,000 and £150,000. The size of the fine will be based on the rateable value of the property and depend on the type of property (domestic or non-domestic).
Penalties between £1,000 and £5,000 also apply where a landlord has registered false or misleading information to the PRS Exemption Register.
The Regulations can be viewed here.