As temperatures around the world are rising, so are the requirements for many businesses to be more energy-efficient or carbon neutral. Consumers are more aware and demand more from suppliers and businesses. Governments are making lots of changes to regulations and rental properties are soon to face tighter controls. For landlords, this can be a little confusing in an already heavily regulated market.
So, what has been changing? What is coming in the future and what do you need to do? We will cover all these points and more to help you navigate the jargon and regulations in this nifty guide!
In 2018, the Minimum Energy Efficiency Standards (MEES) came into force. This required all rental properties let/sold in England & Wales to have an Energy Performance Certificate (EPC) rating of E or above.
In 2020, this was extended to include all existing tenancies, not just new ones or renewed tenancies. Without an EPC rating of E or above, a property cannot be let legally unless an exemption is granted (see below).
The Scottish parliament was to have announced similar requirements in 2020 but because of the pandemic they are yet to be passed through the Assembly and the consultation seems to be ongoing. It is expected to be broadly in line with England & Wales with a minimum EPC rating of E and to come into force in 2022, although an exact date has not been set.
In December 2020, the government announced a proposal to further increase the requirements to MEES.
The proposal is that all rental properties will have to have an EPC rating of C or above from 2025. Similar to the previous rollout, this will apply to new tenancies first and in 2028, it will apply to all tenancies including existing and renewed tenancies.
Perhaps more importantly for landlords, from 2025 there is also a proposal to increase the penalty fine for not having a valid EPC from the maximum of £5,000 to £30,000. This large increase is designed to incentivise landlords to make their properties energy efficient.
A property of a ‘C’ rating would help tenants afford to stay there as energy prices are rising but if landlords aim to get the work done sooner rather than later, they are more likely to secure the services of good professionals before demand for such qualified people increases closer to any deadlines.
Over the last few years, nearly all EPC certificates have been uploaded to a central online register that is free to access here – Government EPC Register Search. On it, you can see the overall rating, notes about how the rating assessment was reached, and what steps you can take to increase the energy efficiency of that property. You can even test which changes have the greatest impact. Be aware that recently (2022) energy prices have increased considerably, so the savings on gas and electricity changes could be higher than the website predicts.
EPCs are valid for 10 years and have an expiry date on them. If your EPC has expired, then currently you do not have to get it renewed. In the future, you will need to get it renewed to renew an existing tenancy, start a new one, or sell the property.
If there is no EPC as the property has never been assessed, then you need to contact an Energy Assessor. To do this, you can just search online to find local assessors, or you can use this government online tool – Government EPC Assessor Search. It should cost between £30 and £50 for a standard assessment and take the qualified individual about 30 to 40 minutes to complete.
Given that the EPC will be openly available to see online, then tenants can check on them any time. Even so, landlords will have to show evidence they have provided a copy of the EPC to new tenants and existing tenants renewing their tenancy agreements.
Should your property not meet the required standard then you may have to carry out some improvements on the property such as:
Some of these improvements can be quite costly and can take time, so being prepared before the 2025 deadline is recommended.
There is a ‘high-cost exemption’ you can apply for via the government Private Rental Sector (PRS) Exemptions Register. If the costs of improvements can be proven to be above £3,500, then you should be eligible.
All improvements that cost less than £3,500 should be made and if the property still cannot make the E grade, then you can apply for an ‘All Improvements Made’ exemption. There are other exemptions and full details can be found using the government’s online guidance – PRS Exemption Guidance & Requirements.
Some properties cannot have certain works done to them e.g., listed buildings. If this is the case, there may be exemptions to the rules and you should seek advice from the relevant authorities before possibly using the PRS Exemptions Register.
Listed buildings require permission to make changes that might alter their character or appearance. There is no blanket rule that says listed buildings are exempt from having energy-efficient improvements made or automatically exempt from MEES requirements. If you are unsure, seek advice from the relevant authorities on how to proceed and maybe apply for an exemption using the PRS Exemptions Register as above.
As noted earlier, there is a proposal that in 2025, the requirement will be for an EPC rating of C or above, which will not be easy for many properties to achieve. The government estimate that the average cost to improve a property to that standard will be circa £4,700. This will increase the cap for exemptions based on the cost to £10,000, resulting in most landlords having to either sell the property or do the recommended work to achieve the rating.
To aid landlords, the government is advising an approach called “fabric first”, suggesting insulation for walls, lofts, and floors first along with the installation of a smart meter.
Unfortunately, the Green Homes Grant scheme closed on 31st March 2021. There may well be pressure on the government to offer help for energy-efficient upgrades but there is currently no sign that they will.
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