In our previous posts, we discussed the Government’s guidance on the minimum level of energy efficiency required in April 2018. In this post, we will concentrate on the exclusions and exemptions that apply to the minimum standard.
- The property remains sub-standard despite the completion of works
The landlord may rely on this exclusion if he has undertaken and completed all the relevant energy efficiency improvements that can be made and the property remains sub-standard. The landlord will need to register the exclusion with the National PRS Exemptions Register. The exclusion will last for five years after which the landlord is obligated to attempt to make energy efficiency improvements once again. If the improvements are not possible then the exclusion must once again be registered.
- The landlord cannot obtain “no upfront cost” funding
Our previous posts on funding can be read here and here. But the landlord may rely on this exclusion if the energy efficiency improvements cannot be made wholly at no cost to the landlord. As above, the same National PRS Exemptions Registration must be followed.
- Wall insulation
The Regulations recognise that certain wall insulations are not appropriate for certain property types even if they have been recommended and even where the finance is available. Specifically, the landlord energy efficiency measure is not considered to be a relevant measure where it is:
- cavity wall insulation, external wall insulation or internal wall insulation (for external walls), and
- where 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 (or the building of which the property forms a part).
There are specific requirements relating to the expert that can be instructed in this respect so care needs to be taken when considering this exclusion. Again, the exclusion must be registered.
- Third party consent exemption
Certain energy efficiency improvements may legally require third party consent before they can be completed. Such consent might be needed from for example, a superior landlord or mortgage company. In the event that consent is either refused or simply not given landlords must be in a position to prove that they made a reasonable effort to seek it. If some of the improvements can be made without the need for consent then landlords should carry out those improvements in any event. However, where this exclusion is applicable the landlord is again required to register it.
- Property devaluation exemption
An exemption of 5 years will apply if the landlord has obtained a report from an independent surveyor who is on the RICS [ https://www.rics.org/uk/ ] register advising that the improvements will reduce the market value of the property, or the building of which it forms part of, by more than 5%. Again, the same registration requirement applies.
- Temporary exemption due to recently becoming a landlord
The Regulations acknowledge that in some circumstances a person may suddenly become a landlord. If this is the case the new landlord may rely on a 6-month grace period within which they are required to carry out the improvements. The circumstances in which a person could become a landlord unexpectedly are (this is not an exhaustive list):
- the grant of a lease due to a contractual obligation,
- where the tenant becomes insolvent and the landlord has been the tenant’s guarantor (in this situation, the tenant’s guarantor becomes a landlord when taking over the lease); or
- a new lease has been deemed created by operation of law.
Things to Note
On the sale or transfer of a property, the exemptions or exclusions lapse. This means that the new owner must apply for any relevant exemptions or exclusions.
All relevant exemptions or exclusions can be registered from 1 October 2017. These exemptions are registered on a self-certification basis with local authorities monitoring and auditing any relevant exemptions and exclusions. A limited amount of information about exemptions registered will be publicly available from April 2018.
It is important to note that almost all the exemptions require registering with the exemption portal. This portal is only available on a pilot basis and if you wish to register at the current time you need to email the BEIS minimum standards team at PRSregisteraccess@beis.gov.uk. Hopefully the full portal will be running shortly. The portal is a national register of property that is below the required energy efficiency standard and it may be the case that these properties will be targeted for future energy efficiency measures.