We have previously reported on the publishing of guidance for the new minimum energy levels for rented property which are being phased in from 1 April 2018.

Here, we will take a look at these regulations and guidance in more detail because now is the time to start planning for these changes brought in by The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.

What’s changing?

From 1 April 2018, any new tenancy, renewal or extension, in order to be rented, the building must have a minimum energy rating of “E”. The rating is found on the Energy performance Certificate for the building.

From 1 April 2020, the minimum level “E” applies to all tenancies – including existing.

As a side note, non-domestic properties are required to have a minimum “E” rating from 1 April 2018 for all new tenancies, rentals and extensions. From 1 April 2023, all non-domestic lettings (including existing) must be at an “E” rating or better. We won’t be discussing non-domestic property further in this article.

Guidance published

New guidance has been published called The Domestic Private Rented Property Minimum Standard (there is also non-domestic guidance on the linked page).

Energy Improvements

The easiest way to comply is to ensure the energy rating is at an “E” or better! By far the most impact is by having a modern condensing type boiler. Otherwise, loft insulation can be installed and LED bulbs have a small beneficial impact.

Have in mind, the assessor will generally only evaluate what can be seen without destructive investigation. Therefore, if the walls have been insulated and then skimmed over (perhaps by using thermal laminate boarding or roofing batten and filled with insulation), this won’t be counted unless the assessor can physically see the insulation.

The energy performance certificate will show a list of recommendations and the impact they will have. These are known as “relevant energy efficiency improvements” (but see later under exemptions).

Tenancy Types

The minimum energy requirements only apply to the following types of tenancy:

• Assured or assured shorthold tenancy (Housing Act 1988)
• Regulated tenancy (Rent Act 1977)
• Domestic agricultural tenancy ¹

Properties where no EPC required

Tenancies before 2008

Broadly speaking, since 2008, an EPC has been required to be given to a prospective tenant on let property. If the property was let before an EPC was a legal requirement, the minimum energy rating won’t apply from 2020.

… the Regulations only apply to those domestic properties which are legally required to have an Energy Performance Certificate (EPC) … [source: para 6]

Individual Rooms

In relation to the letting of individual rooms, the guidance relating to when an EPC is required states:

An EPC is not required for an individual room when rented out, as it is not a building or a building unit designed or altered for separate use. The whole building will require an EPC if sold or rented out.

However, this is not our advice! Since October 2015, a landlord in England cannot serve a section 21 notice if they haven’t given the tenant an EPC. It is therefore submitted that it’s better to have one done for the whole building and give each individual room a copy as and when a new tenancy is given. That way, there is no arguing over possession with the court. Furthermore, the new accelerated possession claim form simply asks has the tenant been given an EPC- it doesn’t have an option in the form for “an EPC is not required”. As such, an explanation would need to be added if there is no EPC given.

Furthermore, the minimum energy guidance states at paragraph 9:

Please note that there is no obligation to obtain an EPC on a letting of an individual non self – contained unit within a property, such as a bedsit or a room in a house in multiple occupation (HMO). However the property in which the unit is situated may already have its own EPC covering that property as a whole; this could be because the property had been bought within the past ten years, or because it had previously been rented out on a whole-property basis. If a property as a whole has a valid EPC and that EPC shows an energy efficiency rating of F or G, then the owner/landlord will not, from April 2018, be able to issue new tenancies for non-self-contained units within the property until steps are taken to comply with the Regulations.

As a result, it is best to ensure the building as a whole has a rating of “E” or better and a copy given to each tenant.

Listed buildings

The guidance clarifies that in most cases an EPC is required on a listed building. However, it may well be the case that if the building doesn’t achieve the minimum rating, an exemption may apply if consent cannot be obtained to carry out the improvements – see later.

Exemptions

National PRS Exemptions Register

There are a number of exemptions from having to achieve an “E” rating or better. But, in all cases, the property must then be registered on the National PRS Exemptions Register which will normally last for five years after which an attempt must again be made to bring the property up to the minimum rating. This is a public database allowing enforcement authorities easy access to check whether a rented property has been placed on the register.

At the time of writing, the register is in pilot and anyone wishing to register their property should email PRSregisteraccess@beis.gov.uk

Where all the ‘relevant energy efficiency improvements’ for the property have been made (or there are none that can be made) and the property remains sub-standard

If all the recommendations shown on the EPC have been completed and the property still doesn’t achieve the minimum rating, the property will be exempt and as such will need registering.

Where a recommended measure is not a “relevant energy efficiency improvement” because the cost of purchasing and installing it exceeds £3,500

From 1 April 2019, if the landlord cannot make any recommendations to bring the property up to the minimum rating after spending up to £3,500 (the “cost cap”) either wholly financed by the landlord or partly financed by finance arrangements (see below) and the landlord, the property can be registered as exempt.

Funding towards the improvements can be obtained from various 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.

Funding can be achieved by combining any of the above.

See this article for more information about the April 2019 changes and the cost cap.

Relevant energy efficiency improvements – wall insulation

Wall insulation is not considered a relevant energy efficiency measure if all the following apply:

• the measure is cavity wall insulation, external wall insulation or internal wall insulation (for external walls), and
• the landlord has obtained written expert advice which indicates that the measure is not appropriate for the property due to its potential negative impact on the fabric or structure of the property

The expert advice must be from one of the following:

• an architect registered on the Architect Accredited in Building Conservation register
• a chartered engineer registered on the Institution of Civil Engineers’ and the Institution of Structural Engineers’ Conservation Accreditation Register for Engineers
• a chartered building surveyor registered on the Royal Institution of Chartered Surveyors’ Building Conservation Accreditation register
• a chartered architectural technologist registered on the Chartered Institute of Architectural Technologists’ Directory of Accredited Conservationists
• an independent installer of the wall insulation system in question who meets the installer standards for that measure, as set out in Schedule 3 to the Building Regulations 2010.

Third party consent exemption

If the landlord is unable to obtain consent (where consent is required to be obtained) from a third party, the property may be registered as exempt. Examples of third parties include:

• listed building consent
• planning permission
• superior landlord (freeholder for example)
• the tenant occupier

For the exemption to apply, “reasonable efforts” must be made to obtain consent and evidence will need to be provided for the exemption register.

From 1 April 2019, if it was the tenant who refused consent to carry out improvement works and the property was on the exemption register for that reason, the exemption ends when the tenancy ends.

Property devaluation exemption

The property may be registered as exempt if:

the landlord has obtained a report from an independent surveyor who is on the Royal Institution of Chartered Surveyors (RICS) register of valuers advising that the installation of specific energy efficiency measures would reduce the market value of the property or the building it forms part of, by more than five percent.

Temporary exemption due to recently becoming a landlord

From 1 April 2020 (when all rented property must meet the minimum rating) a temporary exemption of six months will apply where a person becomes the landlord on purchasing an interest in a property and, on the date of the purchase, it was let on an existing tenancy.

A number of other exceptional cases are available but unlikely to apply to readers of this article. Please see the guidance for more information.

Enforcement

A local authority will enforce the regulations and have a number of powers.

Compliance notice

A local authority may decide to issue a compliance notice which can be issued within 12 months of a suspected breach.

A compliance notice may request the following information:

• the EPC that was valid for the time when the property was let;
• any other EPC for the property in the landlord’s possession;
• the current tenancy agreement used for letting the property;
• any Green Deal Advice Report in relation to the property;
• any other relevant document that the enforcement authority requires in order to carry out its compliance and enforcement functions.

They may also require some or all of the information to be placed on the exemption register.

Financial penalties

If the local authority decides to issue a financial penalty, they have a discretion as to the amount within a framework. The maximum penalties are as follows:

(a) Where the landlord has let a sub-standard property in breach of the Regulations for a period of less than 3 months, the Local Authority may impose a financial penalty of up to £2,000 and may impose a publication penalty.

(b) Where the landlord has let a sub-standard property in breach of the regulations for 3 months or more, the Local Authority may impose a financial penalty of up to £4,000 and may impose a publication penalty.

(c) Where the landlord has registered false or misleading information on the PRS Exemptions Register, the Local Authority may impose a financial penalty of up to £1,000 and may impose a publication penalty.

(d) Where the landlord has failed to comply with a compliance notice, the Local Authority may impose a financial penalty of up to £2,000 and may impose a publication penalty.

Appeals

An appeal is available to the First-tier Tribunal (General Regulatory Chamber) within 28 calendar days of the local authority’s decision.