What do EPC’s mean for Landlords?

What pressures will be put on landlords as the Minimum Energy Efficiency Standards (MEES) start to be enforced in England and Wales?

From the 1st April this year the domestic MEES came into play meaning that landlords need to make sure they reach the minimum energy efficiency standard for all their properties. With changes to the Energy Act 2011 it made it illegal to rent out private properties that don’t reach this standard.

An Energy Performance Certificate (EPC) indicates the efficiency of a building using a rating system from A, being the most efficient, to G the least. The standards that have been set mean that landlords have to secure a rating of E or higher to renew a lease, or to issue a new one.

The future shows a further rule coming into play in 2020, that a lease where the EPC is less than an E will not be able to be continued. Forcing landlords to improve their EPC ratings by this time at the very latest, or face a fine of up to £4,000.

Legislation

This new legislation is applicable to all assured tenancies including shorthold and agricultural occupancy, or similar. The rules do not affect the validity of the lease though. The properties that are legally required to have an EPC fall within the MEES, but if the EPC has expired and there is no reason to renew, then the legislation will not apply.

Also listed buildings that are not required to have an EPC do not fall within the MEES remit, nor do temporary buildings or spaces of less than 50m². If a landlord has a property which they do not think requires an EPC then they must register it on the national private rented sector (PRS) exemptions register. This service is a pilot, but where granted exemptions are valid for up to 5 years.

Since 2016, in addition to the MEES, domestic tenants have had the legal right to request improvements to the energy efficiency of their properties. The landlord cannot refuse these requests without reason, but the rules are subject to a no-cost-to-landlord rule. This means that any changes to the building must be funded by the tenant or through grants.

Efficiency Improvements

According to the 2014 English Housing Survey there are an estimated 280,000 properties that do not meet the E rating on their EPCs. The Government has made a clear statement that it is driving to improve this number, with a general improvement in the energy efficiency of private rental properties.

The Energy Company Obligation is a Government scheme that aims to reduce our carbon emissions and tackle fuel poverty in this country. It is not enough though to bring the stock of private rentable homes up to the acceptable EPC levels required. Enough funding is not being found to help tenants address the issues they find themselves in. At the current rate, the F and G EPC rated homes will not be able to deliver the changes required, which is detrimental to the tenants.

The Government is proposing to force landlords to into monetary contributions to improve these low-rated houses. The DBEIS is recommending that the no-cost-to-landlord rule is scrapped, and the cost of upgrading be capped at £2,500. They predict that the average cost to improve an F or G rated house would be £865, although other specialists believe a higher cap will result in lower energy bills for tenants.

In the long-term future the Government has pledged that the standards will be raised with a minimum EPC rating of a C to be brought in by 2035.

Recommendations

The most important thing when trying to get the best EPC rating for your property is to ensure that the assessor is given the most accurate information. When a default rating has been given due to missing information, then this will usually result in the worst-case rating possible. If landlords have all the relevant details then this could make the difference between a one or two gradings of the EPC system.

If a draft EPC can be created then this can help landlords improve any recommendations before the EPC is issued. This new legislation is required when a lease is renewed or issued so landlords with a portfolio of properties can work through them as they arise.

If landlords can get ahead of the game in the years to come, then when more pressures are put on achieving EPC ratings of at least a grade C then their properties will already be well on the way to reaching this mark. At the end of the day, any investments in properties now will enhance their properties value and desirability in the future.

Read more about The Rental Market Shortage

Contact Richard for any housing enquiries.