Introduced in April (2018) all rented premises in England and Wales must meet Minimum Energy Efficiency Standards (MEES) of an EPC rating set set at “E” for all new tenancies.
“The Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015 establish a minimum level of energy efficiency for privately rented property in England and Wales. This means that, from April 2018, landlords of privately rented domestic and non-domestic property in England or Wales must ensure that their properties reach at least an Energy Performance Certificate (EPC) rating of “E” before granting a new tenancy to new or existing tenants. These requirements will then apply to all private rented properties in England and Wales – even where there has been no change in tenancy arrangements – from 1 April 2020 for domestic properties, and from 1 April 2023 for non-domestic properties.”
Currently landlords can claim an exemption if they are unable to obtain government funding for the necessary energy improvements. But this is only a temporary concession and when that ends Consumer Group Which? is warning that the costs to landlords could reach £3500.
The regulations will hit some landlords hard. The currently available “at no cost to the landlord” exemption concession means that landlords can avoid a fine for non-compliance, providing they can show that they cannot obtain improvement funding from their local council or from the government’s Green Deal* scheme.
From next year landlords may need to fork out up to £3,500 per proeprty, the point at which the efficiency improvements cap ceiling of £3,500 is reached, to improve the energy efficiency of their rental property, when this exemption is removed.
So, the upshot is, landlords will have to pay out of their own pockets for any improvements needed to bring their rental premises up to the minimum “E” rating, except for any excess amount needed above the £3500 cap.
The changes are expected to come into force in early 2019 after consultations which took place on energy standards going forward, this year.
The government has estimated the cost of bringing properties in the private rented sector (PRS) up to the minimum standard necessary to meet the regulations and improve standards throughout the sector as a whole will average out at £1200 per property.
Claire Perry the energy minister has said:
“While the vast majority of landlords take great pride in the properties they own, a minority still rent out housing that is difficult to keep warm.
“Upgrading these homes so they are more energy efficient is one of the most effective ways to tackle fuel poverty and help bring down bills for their tenants, saving them £180 a year.”
Many rental properties fall into the category of older, less easily converted premises, because they have solid walls and no means of providing insulation in a cavity, which is the case with more modern construction houses. It means that converting these older houses is much more expensive.
This problem is particularly acute in rural areas with premises of old stone construction. They do not lend themselves to being easily adapted with modern insulation methods, so in some particular cases there are exemptions, for example, with listed buildings.
To ease the burden on landlords, and in particular those with large portfolios of buy-to-lets, the residential Landlords Association (RLA) has been lobbying the government to make all of the cost of meeting these regulations tax deductible, so far without success.
The RLA’s policy advisor, David Smith has said:
“It is bizarre that, for example, replacing a broken boiler is classed as a tax-deductible repair, but this is not the case if a landlord wants to replace an old boiler with one that is more energy efficient”.
*The government is no longer financing Green Deal loans but some funding is still available from approved suppliers, subject to a Green Deal assessment.
The Private Rented Property minimum standard – landlord guidance documents