Properties that are on the market for rent or sale must have an EPC. The EPC advises potential tenants and purchasers how much it will cost to heat and light the building for a year and summarises this in a rating from A to G, with A being the most efficient. The EPC will also advise potential tenants and purchasers what the rating could be if specific improvements are made and sets out the most advantageous of those improvements along with their return in terms of reduced bills and an estimated cost.
Since 2016 tenants have had the right to approach their landlord for consent to carry out listed energy efficiency improvements with a view to reducing their energy bills.
With effect from 1 April 2016, under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, tenants of assured or assured shorthold tenancies have the right to request consent from their landlords to carry out energy efficiency improvement works. These works can be carried out by the tenant if the works:
- are listed in the Schedule to the Green Deal (Qualifying Energy Improvements) Order 2012; or
- are required to connect to the gas network; and
- will be at the cost of the tenant either personally or through government green deal funding projects (note however that most of these funding projects have been withdrawn).
That means that the tenant will need to comply with either of points 1 or 2 and must also comply with point 3. At this stage landlords are not required to fund the works themselves.
When requesting permission to carry out the improvements, the tenant needs to provide along with their request a copy of the EPC, surveyor’s report, or Green Deal Advice Report. The tenant should also specify and provide details of the works that they wish to carry out. Where the tenant fails to provide any of these details or one of the documents when making the request, the landlord will have grounds for refusing permission for the works.
Circumstances where the landlord may refuse consent:
- Third party consent is being refused or provided subject to conditions which the landlord cannot comply with (this might include a superior landlord’s consent or a Party Walls Act request);
- A surveyor’s report indicates that the works will result in the reduction of the market value of the property by more than 5%;
- The landlord granted similar consent to another tenant within the last 6 months;
- A surveyor has indicated that the works could have a negative effect on the property;
Circumstances in which the tenant is not entitled to make an improvement request:
- Within the last 6 months the landlord sought to carry out the improvements himself and the tenant refused;
- The tenant has served a Notice to Quit or advised the landlord that he intends to vacate at the end of his fixed term tenancy;
- Where the landlord has served a Section 8 or 21 notice or a forfeiture notice with a view to begin possession proceedings or where possession proceedings have commenced; and
- The tenant has within the previous 6 months arranged for improvements to be made under a Green Deal.
There are various time limits to the landlord’s response notice but they are somewhat complex and beyond the scope of this post. Generally, the landlord must advise the tenant whether they:
– refuse and, if so, why;
– consent subject to expert advice; or
– whether they will be making a counter proposal.
Any counter proposal will need to advise the tenant what works the landlord wishes to carry out, confirm that the tenant will make the same savings as those suggested in the tenant’s request, confirm that works will be carried out in the next 6 months, confirm the existence of funding and any necessary third party consent, and finally seek the tenant’s consent.
If there is a superior landlord (usually the freeholder where the rental property is a flat) it is at this point that the landlord must advise the tenant that they will need to communicate with them too before any consent is given.
The landlord (and superior landlord) may refuse consent where it is reasonable to do so. However, if the tenant believes that the refusal is unreasonable they can refer the matter to the First-Tier Tribunal who may make an order consenting on the landlord’s behalf to the making of the improvement(s) that the tenant requested.
Improvement works will usually increase the value of a property however, where landlords fear that the proposed works may reduce the value, they will need to seek advice from a surveyor. If the surveyor confirms the landlord’s fears then any refusal to consent to a tenant’s request can be justified. It is therefore important to be proactive when these requests are made and ensure that the line of communication remains open throughout the whole period.
Where the landlord or superior landlord carry out any improvement works at their own cost they may not be able to recoup the cost from their tenant. There is certainly nothing in the 2015 Regulations which permits them to recover this money so contractual provisions in the AST or long lease may help. Naturally, if the tenant has already sought permission for the works the answer is for the landlord not to do the work and allow the tenant to do so at their expense.
It is important to understand that a tenant is not entitled to any lease extension for this work. However, it would be wise to make clear in a tenancy that no compensation will be offered and to ensure that the consent if given clearly states that this will not result in a new tenancy or any compensation. That said a landlord who wishes to motivate their tenant to do this work may well wish to offer a tenancy renewal when granting consent so that the tenant can enjoy the fruits of their labour.