The new cost cap of £3,500 inc. VAT on properties that have an EPC rating below E will come into force today (April 1). Our previous detailed post can be read here.
The minimum energy performance rating of E for private rental properties was introduced last year on 1 April 2018. This amendment to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations prevented landlords renting properties that were rated F and G and applied to all renewals (including tenancies that become statutory periodic) and new tenancies that began on or after 1 April 2018. For existing tenancies, the minimum rating does not apply until 1 April 2020.
On 1 April yet a further amendment to the Energy Efficiency (Private Rented Property) (England and Wales) Regulations will come into force in England and Wales. Prior to this new amendment landlords with properties rated F and G who were unable to obtain third party funding to make improvements to their rental properties could apply for an exemption to the minimum energy performance rating of E. However, from 1 April 2019 landlords will now need to self-fund up to £3,500 inc. VAT any improvements to properties rated F and G where they have been unable to obtain third party funding in whole or in part. This means a landlord without complete or partial third-party funding must spend up to £3,500 inc. VAT to improve the rental property to a minimum E rating.
There are exemptions to this self-funding cap which a landlord may rely upon. In summary they are:
- Where improvement works have been carried out and the property still remains rated F or G.
- Cost of purchasing and installing the recommended measure will exceed the cost cap.
- Wall insulation cannot or should not be installed.
- Third party consent exemption.
- Property devaluation exemption.
- Temporary exemption due to recently becoming a landlord.
The Department for Business, Energy & Industrial Strategy has issued guidance on the new changes and it is recommended reading for landlords and agents who manage properties currently rated F and G.