Thinking of a Buy to Let or are you already a Domestic Landlord? 1st April 2018 EPC changes - what you need to know
What is an Energy Performance Certificate (EPC) ?
As you will already no doubt be aware an Energy Performance Certificate is required for all properties when sold or let. The certificate will set out the energy rating for the property from A-G with A being very energy efficient with lower running costs, to G being not energy efficient with higher running costs. The EPC will also contain recommendations for ways in which the energy efficiency of the property could be improved.
The New Regulations
The Energy Efficiency (Private Rent Property England & Wales) Regulations 2015 establish a minimum level of energy efficiency for privately rented property in England & Wales. The regulations set out that from 1st April 2018, landlords and privately rented domestic (and non-domestic) property must ensure that their properties reach at least an Energy Performance Rating of E before granting a new tenancy to new or existing tenants.
In addition to this from 1st April 2020 these requirements will also apply to all private rented properties in England & Wales even where there has been no change in the tenancy arrangements.
The reason behind these new Regulations is that EPC F and G rated properties waste energy. It is felt they impose unnecessary cost on tenants and the wide economy, and contribute to avoidable greenhouses gas emissions. Data shows that the average annual cost of energy for an EPC band G property is £2,860. This contrasts with an average annual cost of an EPC band E property of £1,710.
Who will enforce the Regulations?
The domestic property regulations will be enforced by Local Authorities. The Local Authority will be able to issue a compliance notice requesting information where it appears to them that a property has been let in breach of the Regulations. Where the Local Authority are satisfied a breach of the Regulations has occurred, they may impose financial penalties.
Are there any exemptions?
In certain circumstances a landlord may be able to claim an exemption from this prohibition on letting the property if it remains below an E. Where a valid exemption applies, landlords must register the exemption on the national PRS Exemptions Register.
It is important to note that exemptions may not transfer over to a new owner or landlord upon sale , or other transfer of the property. If a let property is sold or transferred with an exemption registered, the exemption will cease to be effective and the new owner will need to make the necessary improvements or register an exemption.
Below are examples of some of the exemptions:-
- Relevant energy efficiency improvements have been made (or there are none that can be made) and the property remains sub-standard.
The minimum rating of an E does not apply where the landlord has made all the relevant energy efficiency improvements that can be made or there are none that can be made. In these circumstances an exemption should be applied for which will then be valid for 5 years. After this time the landlord will need to try again to improve the rating.
- Recommended measure is not a relevant energy efficiency improvement because the cost of purchasing and installing it cannot be wholly financed at no cost to the landlord.
The minimum rating of an E does not apply if the landlord has been unable to access relevant ‘no cost’ funding to fully cover the cost of installing the recommended improvements.
- Wall Insulation.
The Regulations acknowledge that certain wall insulation systems cannot or indeed should not be installed on some particular properties even when funding can be secured to cover the cost. Written evidence will need to be obtain from an expert to confirm that such insulation is not appropriate for the specific property in question. There are a definition of an “expert” which must be adhered to.
- Third party consent exemption.
Some improvements may require third part consent for example solar panels which would require local authority planning consent in some circumstances, consent from Lenders or even the current tenant. If consent cannot be achieved then a landlord may apply for an exemption however the landlord must use “reasonable effort” to seek consent.
- Property devaluation.
This is an exemption for 5 years where 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 by more than 5%.
- Temporary exemption due to recently becoming a landlord.
The Regulations acknowledge that there are some, limited circumstances where a person may become a landlord suddenly and as such it would be inappropriate or unreasonable from them to be required to comply with the Regulations. If someone becomes a landlord in these circumstances, a temporary exemption will apply for a period of 6 months after the date they become a landlord.
Still unsure on your obligations?
If you have any concerns regarding the new Regulations and how this may affect your properties please do not hesitate to get in touch with me and I shall be happy to assist.