The Government has commenced a consultation to amend the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 in relation to domestic properties to remove the “no cost to the landlord” principle.
In our previous post we advised that “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”. This consultation is seeking views on removing this principle by introducing a cost cap of £2,500 per property.
The minimum energy efficiency standard will come into force in April this year and will require landlords to ensure their properties meet the minimum energy efficiency band E. As the regulation currently stands, the landlord will be required to meet this Band E on the first occasion they re-let their property after April 2018. Currently, this obligation is only to be met if the standard can be met ‘at no cost to the landlord’ with the actual cost financed through ‘Pay as you Go’ funding, grant funding (new Green Deal) or subsidy.
However, as we feared the finance and funding opportunities are not as rosy as the Government hoped and alternative arrangements are now being considered. The Green Deal is now in private finance hands and the level of activity appears to be low. Despite other finance providers expressing an interest the government appears to be nervous about how the market will develop. Furthermore, the government fears that supplier obligation funding will not be sufficient to prompt the level of take up required for the improvements needed. These issues are likely to mean that there is simply not enough funding available for landlords to meet the minimum energy efficiency band E “at no cost.” Consequently, the government is no proposing that the principle of “no cost to the landlord” is removed so that sub-standard properties can be improved.
The Government argues that the cost cap is fair and proportionate and balances the needs of both landlords and tenants. The cost cap is anticipated to come into force from April 2019.
The consultation also seeks views on the Green Deal exemption. Under the current system the landlord may claim a Green Deal exemption if they were intending to use Green Deal finance to fund the necessary improvements, but their tenant withholds consent to have the Green Deal charge attached to their electricity bill.
The government response to the consultation is expected in 2018 at which point we will update this post.