The Government has finally released its Guidance on the minimum level of energy efficiency required for private rented properties. Our previous post on minimum energy levels can be read here.
In summary, the new minimum level of energy efficiency means that:
- from 1 April 2018, landlords will no longer be permitted to grant new tenancies extend or renew a tenancy to an existing tenant if the property has an EPC rating of band F or G. This would include a tenancy moving from a fixed term to a statutory periodic tenancy;
- from 1 April 2020, landlords must not continue letting a rental property which is already let if that property has an EPC rating of band F or G.
Where a property is rated band F or G a landlord will need to make improvements to the property to raise the EPC band to a minimum level of E. However, there are exemptions to this which are:
- the landlord is unable to obtain funding to cover the cost of making improvements; or
- where all improvements which can reasonably be made have been made, and the property remains below an EPC rating of Band E.
Importantly, this means that if a landlord cannot obtain funding to undertake the recommended improvements he will be exempt from meeting the minimum energy efficiency level of band E. We will concentrate on funding in this post.
The funding that a landlord may rely on for the recommended improvements can be one or a combination of the following:
- A Green Deal Plan;
- Energy Company Obligation or similar scheme;
- Funding provided by central government or local authority or third party at no cost to the landlord;
- A combination of any of the above.
Where funding is available to cover the cost of the recommended improvements the landlord will be required to undertake them. If funding is not available to cover the whole cost then the exemption applies. This is because the energy efficiency regulation is based on a principle of ‘no cost to the landlord’, which is why unless funding can be sought entirely for all the improvements, the landlord is exempted from carrying them out.
Where such an exemption applies, landlords will need to register the exemption on the national PRS Exemptions Register.
In practice, this structure makes limited sense given that the Green Deal has been abandoned and is no longer truly available to landlords. This may be a hint that the Government is considering bringing back the Green Deal, or something very like it, but it appears that for many landlords they will be exempt from the requirement to do anything on the basis that no funding is available. However, landlords will need to register if they are claiming that funding is not available.
Further posts on the Guidance and funding options will be published shortly. In the meantime, the Guidance itself can be read here.