Energy Efficiency Regulations

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 have been brought in to tackle the least energy-efficient properties in England and Wales – those rated F or G on their Energy Performance Certificate (EPC).

The Regulations establish a minimum standard for both domestic and non-domestic privately rented property, effecting new tenancies from 1st April 2018.

Benefits of Energy Efficiency

It is proven that EPC F and G rated properties waste energy. They impose unnecessary costs and they contribute to avoidable greenhouse gas emissions. Increasing the energy efficiency of domestic rental properties can help:

  • manage the energy costs of tenants
  • improve the condition of properties and help reduce maintenance costs
  • reduce greenhouse gas emissions

Minimum EPC Standards

The Regulations set out the minimum level of energy efficiency for private rented property in England and Wales is to be an energy performance certificate (EPC) rating of band E from 1st April 2018.

The regulations also state that Listed buildings and buildings within a Conservation Area are not automatically exempt from the requirements and it would be the responsibility of a landlord to understand whether they require to comply with the minimum energy requirements.

Prohibition on letting sub-standard property

The minimum standard will apply to any rented property which is legally required to have an EPC (there are exemptions, some of which are highlighted on the rear of this leaflet).

From the 1st April 2018, landlords may not grant a tenancy to new or existing tenants if their property has an EPC rating of band F or G.

From the 1st April 2020, landlords must not continue to let a domestic property, if that property has an EPC rating of band F or G.

No Cost to the Landlord

There is some good news as the regulations are based on a principle of ‘no cost to the landlord’, this means that landlords of F or G rated homes will only be required to make improvements to these properties where they can do so entirely using third party finance from one or more sources.

Improvements and funding

Identification of relevant improvements required to enable a property to reach a Band E can be identified from the following sources;

  • Within the current EPC Report
  • Within a Green Deal Advice Report
  • Within a Surveyor’s Report

Whilst the above-mentioned reports suggest measures which may be technically suitable for a property, an energy efficiency measure recommended for a property will only be ‘relevant’ for the purposes of the Regulations, where funding is available to cover the full cost of purchasing and installing the improvement(s) from one or more of the following sources:

  • A Green Deal Plan
  • Energy Company Obligation or similar scheme
  • Funding provided by central government or local authority or third party at no cost to the landlord
  • A combination of any of the above

Funding Schemes

The Green Deal is a finance mechanism which enables homeowners and households to take out loans to pay for energy efficiency improvements, with repayments made through the energy bill.

Repayments for a Green Deal loan are made on a “Pay As You Save” (PAYS) basis: after the improvement has been made, the household begins to save energy, ensuring their energy bills are less than they would have been without the improvement, and these savings are used to repay the loan.

The Green Deal finance also includes a “Golden Rule”. This states that the first year’s repayments must not exceed the estimated first year saving of energy costs, and the overall repayment period must not exceed the lifetime of the measures installed.   More details on the Green Deal can be found at: www.gdfc.co.uk

The Energy Company Obligation (ECO) Help to Heat funding is where energy suppliers have had obligations imposed on them by the government to provide households with energy saving improvements.  More details and whether a property may be able to benefit from the ECO funding can be found at:    www.gov.uk/energy-company-obligation

Additional funding options are available from central or local government and from other third-party sources.  Funding, however, from these sources is likely to be less predictable. Landlords will need to investigate what funding could be available in the area where the property is located.

Independent advice on funding together with energy efficiency improvements, is available from the Energy Saving Advice Service on 0300 123 1234 or

http://www.energysavingtrust.org.uk  

Where funding is not available

Where it is proven that funding is not available to fully cover the cost of making a recommended ‘relevant’ improvement then the landlord will not be required to make that improvement to the property. Please note, however, that where a property cannot be improved to EPC E because ‘relevant’ and ‘recommended’ measures cannot be installed without cost, the landlord will still need to take steps to register an exemption on the National PRS Exemptions Register.

The National PRS Exemptions Register

Where a landlord considers that an exemption applies allowing them to continue to let a property below the minimum energy efficiency standard, they will still be obliged to install as many of the energy efficiency measures as possible and provide details of such, prior to registering on the centralised self-certification register – the PRS Exemptions Register.

Exemptions

Whilst the Regulations state that all domestic privately rented properties are required to meet the new standards of energy efficiency, there are some exceptions including;

  • Furnished holiday let properties
  • Houses of Multiple Occupation (HMO)
  • Listed Buildings within a conservation area (subject to certain criteria)
  • Social housing and certain tenancies
  • Properties where the landlord has made all the relevant improvements and the property is still below an EPC Band E, and registered on the PRS Register
  • No improvements have been made but a valid exemption applies and is registered in the PRS Register

If you are unsure if you should have an EPC or if you should now be complying with the minimum standards, landlords should seek clarity from the local Trading Standards office.

Registering for an Exemption

Exemptions are made on a self-certification basis, with enforcement authorities monitoring and auditing to ensure that exemptions are registered in compliance with the Regulations.  The exemption will be logged on the register and all data related to the exemption will be accessible by the relevant authority. Some non-personal data will also be publicly available via the exemption search page.

Each registered exemption lasts only for 5 years, a time limit intended to provide landlords with a chance that circumstances (for example, changes in fuel prices, availability of other funding mechanisms, or a reduction in the cost of improvements) may change enough for improvements to be made in a way which meets the requirement of the Regulations. Alternatively, the landlord can register for a further exemption period.

Landlords are required to provide supporting evidence to prove why they believe an exemption is necessary.  It is important to note that a property cannot be let until the exemption has been accepted and recorded on the register.

Assistance with ascertaining what evidence is required to support an exemption request, can be sought through the Local Authority for the area in which the property is located.

Penalty Notices

When a landlord is found to be in breach of the regulations, the Local Authority can issue a Compliance Notice and thereafter if necessary, impose financial penalties at their discretion -  ranging from £2,000 to £5,000 per property.

 

 

 

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Mrs Tucker June 2020

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— Mrs Tucker, June 2020