The Energy Act 2011 is the result of the much talked about Energy Bill receiving Royal assent. You have probably heard of items contained within the act without perhaps realising that that’s where they originate.

In particular, the Energy Act 2011 enacts the following:

  • Green Deal
  • Landlord not to refuse reasonable request for energy efficiency improvements
  • Landlord not to let property unless meets minimum energy efficiency

Green Deal

The green deal is to be a new financing model to enable the provision of fixed improvements to the energy efficiency of households and non-domestic properties, funded by a charge on energy bills that avoids the need for consumers to pay upfront costs.

In addition to defining what a green deal plan will be and requiring the secretary of state to produce framework regulations, the act outlines the various aspects necessary to it’s operation.

How it will work

In essence, the energy companies will become “green deal providers” and will employ qualified assessors. A property will be inspected by an assessor and energy efficiency improvements recommended. The green deal provider will then provide an estimate of the savings on the energy bill if the works were carried out and offer to carry out the works based upon instalments added to the energy bill. The amount and length of the instalments will be determined by the framework regulations which are currently being consulted on. [section 4 Energy Act 2011]

The instalments will be paid by “the person who is for the time being liable to pay the energy bills for the property” and “will be made to the relevant energy supplier through the energy bills for the property” [s.1(6)]. As tenants are in most cases the bill payer, it will be tenants who pay the instalments by way of their energy bill.

As it is the tenant who will ultimately pay the instalments for the works, there are provisions allowing regulations to determine what permissions must be obtained before improvement works are carried out and presumably those same regulations will determine what happens if consent cannot be obtained from the bill payer.

There will be a code of practise governing the workmanship of improvements carried out by the relevant persons [s.7]

Documentation and landlord / agent duties

Once improvements have been made, the green deal provider is under a duty to provide documentation which will contain information about the plan (e.g. amount and length of instalments etc.) [s.8(4)]

It will be a requirement that the seller or prospective landlord of a property which has a green deal plan to:

  • Obtain the document mentioned above or, if the green deal provider has not produced the document yet, to produce a document containing the same information in connection with the green deal plan as that document would have contained, and
  • Provide the document free of charge to any prospective buyer, tenant or licensee at the specified time.

This only applies if the prospective tenant or buyer is to pay the energy bills. [s.12].

A person becomes a prospective buyer, tenant or licensee in relation to a property when the person—

  • requests any information about the property from the seller, prospective landlord or licensor or an agent for the purpose of deciding whether to buy or let the property,
  • makes a request to view the property, or
  • makes an offer, whether oral or written, to buy or let the property.

[s.12(4)]

Tenancy agreement

The prospective landlord (or agent) must secure that the contract for tenancy or licence agreement includes an acknowledgment by the tenant or licensee that they will be liable to make payments under the green deal plan and that certain terms of that plan are binding on the bill payer. [s.14(2)]

The form of words is to be made by regulations and is currently undergoing consultation. Draft regulations though suggest the following term might be used:

“The [buyer/tenant/licensee/other*] acknowledges that, as a person who is, or may become, the person who is liable to pay the electricity bill at the [property/premises/other*], the electricity bill payer is:

(a) liable to make payments under a green deal plan; and

(b) bound by the terms of that plan that are stated to bind the electricity bill payer.”

For the avoidance of doubt, these are draft regulations only. The authors experience of draft regulations is that the real regulations often bear no resemblance to the draft.

It is too soon to speculate what the penalties would be if a tenancy is granted without such a term however, the act allows regulations to be made which can require landlords to pay compensation to a green deal provider.

Commencement

It is suggested that the green deal will commence from December 2012 but this is not certain yet.

Private rented sector

One of the more significant parts of the Energy Act to affect private landlords (and agents) is chapter 2 which applies to the private rented sector in England or Wales (chapter 3 applies to the PRS in Scotland).

Tenants request to carry out energy efficiency improvements

Section 46 requires the Secretary of State to make regulations whereby a tenant will be able to request consent to have energy efficiency works carried out and the landlord will not be allowed to unreasonably refuse consent.

The request will only be reasonable if the works can be: (highlights added)

  • wholly paid for pursuant to a green deal plan
  • provided free of charge pursuant to an obligation imposed under the Gas Act 1986 or the Electricity Act 1989
  • wholly financed pursuant to a combination of such a plan and such an obligation, or
  • financed by such other description of financial arrangement as the regulations provide.

The request for consent is only available to tenants where the property is let:

  • under a tenancy which is an assured tenancy for the purposes of the Housing Act 1988,
  • under a tenancy which is a regulated tenancy for the purposes of the Rent Act 1977, or
  • under a tenancy which is specified for the purposes of this subsection in an order made by the Secretary of State

[s.42(1)]

The regulations must come into force no later than 1 April 2016. [s.46(5)]

Minimum energy efficiency standards

Section 43 of the act provides that the Secretary of State must make regulations to secure that a landlord of domestic property which has an energy performance certificate which falls below such level of energy efficiency (as demonstrated by the energy performance certificate) as is provided for by the regulations, may not let the property until the landlord has made to the property such energy efficiency improvements as are provided for by regulations.

“… Private rented properties must be brought up toa minimum energy efficiency rating of ‘E’. This provision will make it unlawfulto rent out a house or business premise that does not reach this minimumstandard.

This requirement is subject to there being no upfront financial cost to landlords.Therefore, landlords will have fulfilled the requirement if they have eitherreached “E” or carried out the maximum package of measures funded underthe Green Deal and/or ECO (even if this does not take them up to an ‘E’rating)” [source: Department of Energy and Climate Change Energy Act 2011: Private Rented Sector]

“Energy efficiency improvements” means if the works can be: (highlights added)

  • wholly paid for pursuant to a green deal plan
  • provided free of charge pursuant to an obligation imposed under the Gas Act 1986 or the Electricity Act 1989
  • wholly financed pursuant to a combination of such a plan and such an obligation, or
  • financed by such other description of financial arrangement as the regulations provide.

The regulations must take effect no later than 1 April 2018 [s.43(6)] and almost identical provisions apply for non-domestic properties [s.49]. The act allows regulations to be made to impose sanctions upon landlords who let property contrary to the rules [s.45 & s.51].

Energy Performance Certificates

Section 74 of the Act allows the Secretary of State to make regulations to allow disclosure of information held on the national register of all 7 million EPC’s throughout England and Wales (section 75 allows the same for Scotland) to green deal providers. This will allow the energy companies access to the data for the promotion of the green deal.

Other parts

The reminder of the Energy Act 2011 makes a number of necessary amendments in particular to the Electricity Act 1989 and the Gas Act 1986. Additional burdens are placed on energy companies to promote the reduction in carbon emissions and home-heating costs [Part 1, Chapter 4] and further measures are introduced for the security of energy supplies [Part 2].

 

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