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Landlords have just months to meet energy performance targets or face big fines

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From 1 April 2018 Regulations under The Energy Act 2011 (EA 2011) will make it unlawful for a private Landlord to rent out a domestic property that does not have a minimum energy rating of E. This will apply to all new tenancies and renewals after that date. By 1 April 2020 all existing tenancies will come under the regime. Enforcement will be by local authorities through Trading Standards. In the first instance a Compliance Notice may be served and if the response is not deemed to be satisfactory a Fixed Penalty Notice up to £4,000 can be issued.

We have all become familiar with the energy ratings of the white goods we find in our homes. These are concerned with energy efficiency on a scale lettered A to G and with accompanying coloured arrows from green through to red. A (green) is the best rating and G (red) the poorest.

Landlords are already required at the start of a tenancy to provide their Tenants with a 10 year Energy Performance Certificate (EPC) but this is the first time there has been a requirement to meet a minimum standard. Under the new law EPC ratings of F or G will have the effect of taking that property off the rental market until the Landlord can prove compliance to bring it within a rating of E or higher.

EPC ratings are concerned with permanent improvements which contribute towards the reduction of heat and energy use. The drive behind this is the Government’s need to meet carbon reductions targets by reducing greenhouse gas emissions. Examples of steps you can take include:-

  • Cavity wall insulation;
  • Loft insulation;
  • Double or secondary glazing;
  • LED bulbs;
  • Draught proofing;
  • More efficient boilers and shower units.

There are some exemptions from reaching the minimum energy rating of E and the one perhaps most likely to apply is where “appropriate, permissible and cost effective” improvements have been undertaken but the property remains below the rating of E. This might apply in the case of older buildings or those of special architectural historical interest and the thinking appears to be that in these cases the improvements could actually cause a diminution in value of the property and the exemption arises where an independent expert puts that diminution at more than 5%.

These Regulations potentially present Landlords with a triple costs whammy. Firstly is the risk of fines. Secondly is the cost of the improvements and thirdly the possible loss of rent during any necessary void periods while works are taking place. On the positive side a property with an improved energy rating may command a higher rent.

Some of the necessary improvements could be expensive and as Landlords will wish to be sure that their efforts do contribute to the rating, it is recommended that professional guidance is sought from a RICS qualified surveyor or energy assessor.

While this blog has concentrated on the domestic market there are broadly similar provisions in respect of non-domestic private rented property.

Andrew Morley provides dispute resolution and residential Landlord and Tenant services from our Lincoln office.