A minimum energy performance rating of E will be required to rent a residential property as from 1st April 2018. This requirement will apply to all tenancies that begin or are renewed on or after 1st April 2018, for existing tenancies the regulations will not apply until 1st April 2020. Landlords that breach these regulations may face a fine of up to £5,000.
The new regulations will apply to assured, assured shorthold and Rent Act tenancies which have an EPC or should have an EPC. Where the EPC indicates a rating of F or G it will be considered substandard under the regulations. The regulations prohibit any landlord from letting any substandard property until the recommended energy efficiency improvements in the EPC have been carried out. Such works only needs to be appropriate, permissible and cost-effective under the regulations but landlords are free to carry out works to an even higher standard.
Local authorities will be responsible for enforcing the regulations. They have the power to serve a notice and request that a landlord provide further information to prove compliance. Where they find that a landlord is in breach they can impose a financial penalty. Further penalties can also be imposed where landlords continue to rent out properties despite the breach and original fine. Such fines will not affect the legality of the tenancy which means that rent is still due and payable.
There are exemptions to the regulations, such as:
- The landlord is required to obtain a third party’s consent or permission to undertake improvements, and such consent was denied, or imposed unreasonable conditions.
- The landlord’s tenant withholds consent for the works.
- A suitably qualified independent surveyor considers that the works will cause a capital devaluation of the property of more than 5%.
The extent of any exemption for listed buildings or buildings in conservation areas remains unclear. We will of course provide an update on this when we can.
This is an area in which government policy is uncertain. Parts of the enabling process for these regulations have already been deferred and it may be that they will not be introduced on time or further exemptions may be applied. In general, landlords who can carry out energy improvements at reasonable cost in between tenancies should probably seek to do so but it is probably worth deferring any big improvements until the position is clearer.