The TDS Charitable Foundation have commissioned and funded a report entitled “Communicating the new EPC rules to landlords and tenants” which can be found here
The Government have issued a new consultation document entitled the THE NON-DOMESTIC PRIVATE RENTED SECTOR MINIMUM ENERGY EFFICIENCY STANDARDS – The Future Trajectory to 2030. The document can be found here:
The Dept of BEIS has just published the results of the consultation about funding improvements to sub-standard domestic properties. Please see document link :
Following a review the current MHCLG guidance for the sale or rental of domestic dwellings , Quidos – our Professional Accreditation Body – have updated their guidance to energy assessors in relation to Listed Buildings.
This guidance has been produced in line with the current industry interpretation, including the sentiment of the PEPA members (Property Energy Professionals Association).
(with thanks to RLA – www.rla.org.uk)
Landlords are today welcoming the Government’s decision to moderate the amount it expects landlords to pay for energy efficiency improvements, where homes have to be brought up to a minimum E EPC rating.
This requirement comes into force for new lets and tenancy renewals from April 2018 and for all residential lets from April 2020.
Original Government proposals were that landlords would be required to pay up to £5,000 per property upfront to meet new energy efficiency standards.
However in a new consultation, Ministers have followed the recommendations of the RLA and cut the limit to £2,500.
The RLA argues that this could help avert a new ‘Green Tax’ on tenants as costs get passed on to them in higher rents.
Whilst the cap has been lowered, the RLA is calling for changes to the flagship scheme for tackling fuel poverty.
Under the Energy Company Obligation (ECO), large gas and electricity suppliers are obliged to help households with energy efficiency measures.
An analysis by the RLA has found that up to June 2017, just 14 per cent of all funding under the ECO scheme was spent in the private rented sector despite the sector representing 20 per cent of all households and also having proportionately more older properties than other sectors.
With 43 per cent of private rented homes having solid walls, more than any other housing type, fuel poverty is worse in the private rented sector than in any other tenure.
The RLA is calling for a portion of funding under ECO to be ring-fenced to recognise the unique challenges in the private rented sector. It also wants measures recommended on an Energy Performance Certificate to be tax deductible when carried out.
RLA Policy Consultant, Richard Jones, said: “The Government has clearly listened to the RLA and cut in half the original cap on how much landlords would be expected to pay for energy efficiency improvements. This is welcome news for tenants as it will mean costs being kept down.
“However the RLA still has concerns that the government is proposing to abandon the principle that the landlord should not have to pay the cost of the work upfront.
“We recognise the importance of tenants living in warm homes. That is why it is vital that the funding is available under ECO to make improvements to their properties.”
To access the consultation click here.
Funding and finance options are currently available for RLA members and other landlords to carry out energy efficiency imprvements.
For further information on grant and finance available through the RLA’s energy partners see the RLA’s energy efficiency funding page.
Listed Buildings ( with thanks to Quidos Technical Support)
DCLG has recently released updated guidance documents for the marketed sale and rent of domestic and nondomestic properties. These documents include “improve guidance on the EPC exemption for historic buildings”.
The Quidos Technical Support team read these documents for an hour and have yet to
note any improvement to the guidance provided.
The decision, ultimately, for whether a listed property shall have an EPC should be made by the
property owner. If an Energy Assessor is contracted to complete an EPC, it should be done, but as
to whether it is required is a decision to be made by the property owner/agent.
Confused? Yes, so are we!!
(WITH THANKS TO THE RESIDENTIAL LANDLORDS ASSOCIATION FOR THIS ARTICLE – WWW.RLA.ORG.UK – NOV 2107)
MINIMUM ENERGY EFFICIENCY STANDARDS
The ending of State aid for the Green Deal means that changes need to be made to the Regulations imposing minimum energy efficiency standards in the PRS. The Government has now indicated what these changes could be and they are noted in the appropriate sections below. We would, however, stress that no final decision has been made and the Regulations themselves have not yet been amended.
Research has also identified that energy performance certificates (EPCs) understate the thermal efficiency of solid walls. Many PRS properties have solid walls. Usually they were built pre-1918 but can be later. Again, the Government are proposing to recalibrate EPCs to give a truer reading. This could mean that some solid wall properties currently rated F under an EPC will no longer require any work and less work may be required in the case of a G rated property. The Government has yet to bring forward the relevant regulations to implement these changes. Landlords of F and G rated solid wall properties are therefore strongly advised to await developments. Should changes be made then a new EPC will be required. Existing EPCs cannot be adjusted. Once EPCs are recalibrated, in these cases, obtaining a new EPC may mean that you no longer need to comply with the Regulations or less work may be required.
As from the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to normally have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. A civil penalty of up to £4,000 will be imposed for breaches. This guidance summarizes the regulations. There are separate regulations effective from 1st April 2016 under which a tenant can apply for consent to carry out energy efficiency improvements in privately rented properties.
For most landlords this will mean that they will no longer be able to rent out a property with a rating of F or G after April 1st 2018. As such landlords with properties in this EPC bracket should begin preparing now for April 1st. However, there are several nuances and exceptions, which this guide covers in detail.
When energy efficiency improvements are compulsory
Where at any time on or after 1st April 2018 a landlord lets a privately rented property which is F or G rated on a current legally required EPC then energy efficiency improvements must be carried out to bring the property up to at least an E rating before the property is rented out, unless the landlord qualifies for an exemption and the exemption is registered on the Public Exemptions Register.
There several ways in which you will be classed as letting a property for these purposes:
- You grant a new assured tenancy, including a shorthold
- You renew or extend an existing assured tenancy, including a shorthold, by agreement with the tenant. This can be done when you grant a fresh tenancy to the same tenant or simply agree with the tenant that the existing tenancy will be extended
- A statutory periodic tenancy comes into existence following the ending of a fixed term assured tenancy (shorthold or non-shorthold). At that point the law imposes a new tenancy on the parties where the tenant stays after the fixed term has run out. This is treated as a new letting for these purposes
- A new assured tenancy by succession comes into existence when a family member takes over a Rent Act protected tenancy
- A new tenancy is granted to a Rent Act protected tenant of the same or a different property owned by the same landlord
- An agricultural occupancy or similar tenancy is granted, renewed or extended
NB: This note does not deal further with tenancies of agricultural dwellings.
In all the above cases the requirement to carry out energy efficiency improvements for non-compliant properties will arise where the property has a valid current EPC (i.e. no more than 10 years old) and the property is legally required to have an EPC because:
- The property which is being let or has in the past been let
- The property has been sold
- The property has been improved and building regulation requirements meant that an EPC is required
The requirement to have an EPC is not just looked at in respect of the property itself which is being let out. It also applies where there has been a requirement for the building, of which the property being let is part, to also have an EPC. This is particularly relevant to non-self-contained units such as bedsits and the position regarding these is explained below under the Section “Flats and bedsits”.
It should be noted that if the letting is not legally an assured tenancy (shorthold or not) or one of the other tenancy types within the scope of the Regulations then the Minimum Energy Efficiency Standard does not apply. The sections on Assured Tenancies and the Exclusions below explain this issue in more detail.
The Examples below help explain some of these issues.
These rules regarding new tenancies are ongoing from 1st April 2018 onwards but, additionally, as from 1st April 2020 they will apply to continuing tenancies which are already in existence on that date. They will then apply on an ongoing basis to continuing tenancies which have a current EPC, if there is a legal requirement for the property to have an EPC.
From 1st April 2020 the Minimum Energy Efficiency requirement will apply to continuing tenancies where there is a valid current EPC for the property, and an EPC is legally required to be in place. The property must therefore be brought up to the minimum E rating before 1st April 2020 to comply with the Regulations, unless an exemption is available and is claimed by being registered in the Public Exemptions Register. This applies to the following ongoing tenancies:
- Assured tenancies, including a shorthold
- Ongoing Rent Act protected tenancies. In practice, however, this means that it will only apply where the property which is let (or where it is part of a building) then the building (as a whole) has been legally required to have an EPC which is most likely to occur if it has been sold
- Assured agricultural occupancy or similar tenancies relating to agricultural dwellings
NB: Again we do not deal further with the lettings of agricultural dwellings in this Guide.
Scope of the Regulations
The Regulations apply to most, but not all, domestic private rented sector properties in England and Wales. It covers the following tenancy types:
- A tenancy which is a regulated tenancy for the purposes of the Rent Acts. In effect, this will be a tenancy where there is a Rent Act protected statutory tenancy (see further below regarding Rent Act tenancies and the circumstances in which compliance with the Regulations will be needed)
- Properties let on a tenancy which is an assured agricultural occupancy and similar tenancies relating to agricultural dwellings
- Properties let under an assured tenancy including an assured shorthold tenancy
Certain lets are outside the scope of the assured tenancy regime and therefore, in effect, there is an additional exemption for these types of tenancy.
Properties within Scope
If a property is legally required to have an EPC then it is potentially within the scope of the Regulations. This means:
- Properties within the scope will include any domestic privately rented property which: has an EPC, and is either (i) required to have an EPC; or (ii) is within a larger unit which itself was required to have an EPC, either at point of sale, or point of let. No changes are made to existing regulations regarding the provision of EPCs. This means that it is the sale or letting of a property which can bring a property within the scope of the Regulations. Similarly, if a bedsit is part of a block that is sold, then the EPC requirement on the sale of the block will bring it within the scope of the regulations
- Flats and houses are subject to the regulations if they are legally required to have an EPC (as a result of being sold or let). In the case of flats this means a self-contained unit. Non-self-contained units such as bedsits do not require an individual EPC but may require one for the whole property
- If a property does not actually have an EPC, then the regulations do not apply
The EPC must be the current EPC if there is one and this must be no more than 10 years old. It follows that if an EPC was obtained when it was required but has run out after 10 years there is no automatic requirement to have another one produced, so that the minimum energy efficiency requirement will not apply at that stage. A further EPC will only be needed the next time that a sale or letting takes place.
If it remains current a new EPC is not required, each time there is a change of tenancy (or a sale) so long as the existing certificate is no more than 10 years old. A further EPC can be commissioned and if this is done then this will become the current one, replacing any earlier certificate. There is no automatic requirement to produce a new EPC after carrying out energy efficiency improvements but this is recommended as the new EPC will then reflect the improvements made. A post installation EPC can likely be the easiest way for landlords to demonstrate that they have complied with the Regulations.
If an EPC has run out without there being a further trigger requiring one, then as the property no longer has a valid EPC (and there remains no requirement to have one) the property will fall outside the scope of the Regulations.
Where a landlord obtains an EPC, but is not legally required to have one, the landlord will not be required to meet the minimum standard. A voluntary EPC of this type may be registered on the official EPC Data Base but there is no requirement to do so. If a voluntary EPC has been registered in this way it will supersede any earlier EPC that may have existed for the property, but official registration of a voluntary EPC will not require the landlord to comply with the minimum standard.
Examples – EPC Requirements and 10 year validity
A landlord intends to let the property on a new tenancy from June 2018. If a property already has an obligatory EPC which is less than 10 years old, then this EPC can be relied upon to let the property. If the EPC is more than 10 years old or if there is no EPC (e.g. because the property has not previously been let) the landlord must obtain an EPC. The Minimum Energy Efficiency Standards will apply where the EPC shows a rating of F or G so works must be carried out up to a minimum E rating unless an exemption applies and is registered.
A property is let under a 10 year tenancy with an EPC F rating where the EPC was obtained, as legally required, in 2016. The Regulations here will not take effect until 1st April 2020. On 1st April 2020 as the landlord is continuing to let the property he/she must comply with the Minimum Energy Efficiency requirements. There is a valid EPC which the landlord was required to obtain at the time of the letting. The EPC will continue to be valid until 2026. The landlord must carry out works to bring the property up to a minimum of E by 1st April 2020 or qualify for and register an exemption to continue to let the property legally.
The property has been let for 10 years with an F rating. The tenancy started in 2009 when an EPC was obtained as required. On 1st April 2020 the landlord is continuing to let the property. However, in this example the landlord will not be subject to the Minimum Energy Efficiency Standards because the EPC expired in 2019. There is no legal requirement on the landlord to obtain a new EPC at that point because the tenancy is ongoing. The landlord will only be required to obtain a new EPC, which will then trigger an obligation to comply, if they intend to sell or relet the property. This can include a letting to the current tenant or to a new tenant.
The situation is the same as in Example 3. However, in 2023 the tenant wishes to sub-let the property. The tenant (who will become the landlord of the sub-tenant) will be required to obtain an EPC at this point. If the new EPC then shows an F or G rating then the Minimum Energy Efficiency requirements must be complied with because the property now has a valid EPC which is legally required.
Flats and bedsits
Flats and houses are subject to the regulations. In the case of flats this means self-contained units and they require their own individual EPC at the point of sale or letting. Non-self-contained units such as bedsits do not require an individual EPC.
If a bedsit is within a property that does have an EPC, then the Regulations will need to be complied with before the bedsit can be rented out if it is F or G rated (or an exemption is registered). Although normally bedsits do not need an EPC, where the house containing the bedsit has been sold the whole property needs to have an EPC. In those cases, the Regulations will apply.
If a flat has its own obligatory EPC as well as the building containing the flat, then it is the EPC for the flat (not the building) which issued to show whether the minimum energy efficiency standard is met.
Buildings excluded from scope of requirements
The following domestic buildings are excluded from the scope of the requirements:
- Buildings and monuments officially protected as part of a designated environment or because of their special architectural historical merit insofar as requirements with certain energy efficiency requirements would unacceptably alter their character or appearance. This includes listed buildings. However, see the next section on Listed Buildings
- Temporary buildings with a planned timed use of 2 years or less
- Residential buildings which are intended to be used less than 4 months of the year
- Stand alone buildings with a total usable floor area of less than 50 square meters
Listed Buildings etc.
The extent of the exclusion of listed buildings from the scope of the requirements is unclear. Likewise, in the case of dwellings located within conservation areas. The Regulations state that this exemption is “insofar as compliance with certain minimum energy efficiency requirements which would unacceptably alter their character or appearance”. This exemption is based on a similarly worded exemption from the need to obtain an EPC. Clearly, if a listed building or dwelling within a conservation area does not have an EPC then the Regulations do not apply because only the existence of an EPC triggers the need to comply with the minimum standards. There is a widely held view that all listed buildings are exempt from the need to obtain an EPC, even if they are sold or let out, but, again, the exact scope of this exemption is not clear. The RLA has prepared a more detailed note on this complex subject.
Notwithstanding the above, for the purposes of the Minimum Energy Efficiency Regulations, if the property has been sold or let since the EPC requirements were first introduced and the property does have an EPC, you should assume the Regulations apply and that the minimum E standard must be attained, subject to any relevant, registered exemption. You should consult with your local planning authority to see what alterations would be acceptable to them. If you cannot obtain listed building consent, then the consents exemption can be relied upon so long as it is registered.
In most instances, residential accommodation will be let under an assured shorthold tenancy. This is the main type of assured tenancy in use in the private rented sector. Where an assured tenancy (whether shorthold or not) is granted on or after 1st April 2018, or such a tenancy continues at any time after 1st April 2020, then the minimum E rating is required. If this is not achieved landlords will be prohibited from letting substandard properties (unless an exemption applies). A tenancy is granted when it is entered, i.e. when a binding contract exists between the landlord and the tenant, even though the date on which the tenant is permitted to take up possession of the property is after the date on which the tenancy is entered into.
As from 1st April 2020 the Regulations will apply to ongoing assured tenancies in existence on or after that date, as well, of course, as any new assured tenancies granted after that date.
However, not all residential lettings will be assured tenancies. If a dwelling is let otherwise than under an assured tenancy, whether shorthold or not, it will not be a Domestic PR property so it will be outside the scope of the Regulations altogether, unless it is let under one of the other tenancy types mentioned in the Section “Scope of Regulations”. For these purposes a dwelling is defined by the legislation as a building or part of a building occupied or intended to be occupied as a separate dwelling.
To determine whether the property is a Domestic PR property therefore you need to consider if the requirements for an assured tenancy (including a shorthold) exist. A tenancy can move in and out of assured status depending on whether the required conditions for an assured tenancy are currently met.
An assured tenancy is the letting of a dwelling which is occupied as the tenant’s only or principal home, or by at least one of them if there are joint tenants. The tenant or tenants must be individuals and they must pay more than £250 per annum or less than £100,000 per annum. A dwelling may be a self-contained unit such as a house or flat but for the property to qualify as a dwelling the tenant need only have exclusive occupation of at least one room, such as a bedsit, even though it is non-self-contained and the tenant shares other accommodation with other tenants. Non-self-contained accommodation of this kind however does not require an individual EPC so it will be outside the scope of the Regulations anyway unless it is part of a building which itself has a valid EPC and is required to have one, e.g. because the building itself has been previously sold.
There must be a tenancy; and not a licence. The tenancy/licence distinction is not an easy one and if you are unsure you need to take your own legal advice. Broadly speaking, there will be a licence and not a tenancy where the agreement is with a lodger as where the occupier shares living accommodation with the owner this will be a licence agreement.
If a licence is granted to an employee under a service occupancy where the employee is required to occupy the accommodation for the better performance of his/her duties, e.g. a caretaker, this will not fall within the scope of the non-domestic PR regime either so long as a licence exists as opposed to a tenancy (if there is a letting to an employee however the position may be different and this is an area on which advice will be required as to the specific circumstances applicable).
Tenancies of non-domestic premises are subject to similar minimum energy efficiency requirements but the rules are different. Most importantly this includes the date when Regulations start apply to continuing tenancies. For non-domestic properties, they only apply from 1st April 2023 for existing tenancies. However, for when new tenancies are granted the same starting date, 1st April 2018, applies.
When it comes to deciding whether premises are domestic or non-domestic PR properties for the purposes of the Regulations, there is an important difference in definitions of the two types of properties. This is because non-domestic PR property is defined as any rented property that is not a dwelling, which means either a building let as a whole (e.g. a house) or, alternatively, part of a building (e.g. a flat) occupied or intended to be occupied as a separate dwelling. Unless, therefore, there is a separate individual letting of an individual separate dwelling under one of the specified tenancy types referred to above it cannot be a Domestic PR property.
If it is a residential non-self contained unit (e.g. a bedsit) then it does not require an individual EPC so it is also outside the scope of the Regulations, unless the building of which it is part has an EPC (where it is legally obliged to have one).
However, if a block of flats (or a house containing bedsits) is let as a whole as opposed to an individual flat, this will fall within the definition of non-domestic PR property, as it is not a letting of an individual self contained unit. The definition of non-domestic PR property does include all other property uses (other than individual self contained residential units such as houses and flats), even though they may be residential in nature.
The concept of premises let as a dwelling requires you to look at the purposes of the latest contract, whether written or inferred from actions by both parties, rather than the use to which the property is put by the occupier. In deciding whether a property is a dwelling you need to look at the terms of the tenancy contract, as well as the nature of the premises. A “dwelling” is a place where someone lives or makes their home. It therefore excludes lettings for holiday purposes and holiday homes, as well as lettings as a short-term expedient, e.g. a refuge. Please note, however, that this section reflects the views of the RLA as to the correct interpretation of what is a separate dwelling. This is in line with current case law but there is no decided case law regarding the definition of what is a separate dwelling for the purposes of an EPC, which is the governing definition for the purposes of the Minimum Energy Efficiency Regulations.
Unlike under the definition “non-domestic PR property” there is no exclusion for longer leases; nor short term lettings. A letting for 99 years or more of non-domestic PR property falls outside the scope of the regulations. There is no exemption for long term tenancies as such from the definition of an assured tenancy, but frequently long leases are granted at a peppercorn or a low ground rent so they are within the low rent exemption and are then outside the assured tenancy regime for this reason.
Rent Act protected tenancies
Regulated tenancies subject to the Rent Act 1977 are tenancies which can potentially be within the scope of the Regulations. It has not been possible to grant new regulated tenancies since the 15th January 1989, well before EPCs were first introduced. The only exception is where there is the grant of a new tenancy to an existing Rent Act protected tenant, whether of the same or a different property owned by the same landlord. In practice, it is only likely that these properties will be subject to the Regulations where an EPC has been obtained when the property was sold (or modified). As they are often unimproved it is quite possible that Rent Act tenancies will have an F and G or rating. Tenants will be called statutory tenants (not to be confused with statutory periodic tenancies).
After the 1st April 2018 if an existing statutory tenant dies then a new tenancy, an assured tenancy by succession, will be automatically granted to a family member living with the deceased (so long as they have lived with him or her at least two years before his or her death). This could potentially trigger the regulations but only if there was an existing EPC which was legally required and remains valid, normally because the property has previously been sold (subject to the sitting tenancy). The landlord can then register a temporary exemption for six months but within this time must carry out the necessary improvement works to meet the minimum E rating, unless another exemption is applicable and is registered. On the other hand, if the existing statutory tenant dies leaving a spouse or partner then there is a transmission of the existing statutory tenancy to that spouse or partner. This is not the grant of a new tenancy, so no question of compliance arises at that point.
From 1st April 2020 onwards if the property has been required to have an EPC, e.g. due to a sale, then the Regulations will apply if the property has an F or G rating. Energy efficiency improvements must then be carried out to bring the property up to a minimum E unless an exemption applies and is registered by the landlord.
Improvements which can be required
Improvement work which can be required is any energy efficiency improvement work which qualified for Green Deal and the installation of gas for an off-gas property so long as the mains are within 23 meters from the property. A list of eligible improvements appears below.
So long as the minimum E rating is obtained, it is left to the landlord to choose which works need to be carried out. Obviously there is nothing to stop a higher rating being achieved.
Sub Standard Properties
Properties within the scope of the Regulations which do not meet the minimum E requirement are referred to as sub-standard properties. There is then an obligation on the landlord to bring the property up to the required standard unless an exemption applies and is registered and a prohibition on letting them unless the work is done.
Prohibition on letting
A domestic private rented sector property is substandard if the EPC rating is F or G, unless an exemption applies. The legislation prohibits a landlord from letting out a substandard property. If there is an EPC in place which shows that the property is an F or G, then it must not be let; otherwise the landlord is liable to penalties. This is subject to any available exemptions. Energy efficiency improvements must be carried out to bring the property up to an E rating at the minimum, unless one of the exemptions is applicable. If the work cannot be carried out to meet the Green Deal Golden Rule, then there is potentially an exemption. Under the Golden Rule there should be no upfront costs (or any net cost to the landlord) because savings resulting from the works should repay their cost over the expected lifetime of the works.
If a landlord lets and continues to let the property in breach of the regulations, however, the breach does not affect the validity or legality of the tenancy itself, so the rent continues to be payable.
Exemptions, restrictions on making improvements
Only appropriate, permissible and cost-effective improvements are required under the regulations. Landlords will be eligible for an exemption from reaching the minimum standard where they can provide evidence that one of the following applies:
- They have undertaken those improvements that are cost-effective but remain below an E EPC rating. As currently defined cost-effective measures are those improvements that are capable of being installed within the Green Deal’s Golden Rule. This ensures that landlords will not face upfront or net costs for the improvement works. However, the scope of this exemption is under review and may be replaced by a cost cap. The improvements that must be considered are all the relevant energy efficiency improvements as required for the property contained in the Section “Improvements which can be required” at the end of this Guidance
- Where they are unable to obtain funding via the Energy Company Obligation (ECO), Green Deal Finance or local authority grants. The landlord is required by a contractual or legislative obligation to obtain a third party’s consent or permission to undertake relevant improvements relating to the minimum standard, and such consent was denied, or was provided with unreasonable conditions
- The landlord requires consent, and the occupying tenant withholds that consent. It should be noted that you need to check the tenancy agreement. A tenant’s consent may not be required where the tenancy agreement allows you to enter to carry out improvements (as opposed to just repairs), in which case no consent is needed as you are entitled, as landlord to do the work
- Measures required to improve the property are evidenced by a suitably qualified independent surveyor, for example from the Royal Institution of Chartered Surveyors (RICS), as expected to cause a capital devaluation of the property of more than 5%. Only those measures that are expected to cause such devaluation would be exempt from installation
- There will be no requirement to install wall insulation under the regulations where the landlord has obtained a written opinion, from a suitably qualified person or from the independent installer engaged to install the measure, advising that it is not an appropriate improvement due to its potential negative impact on the fabric or structure of the property (or the building of which it is part)
Temporary exemptions can apply where someone has recently become a landlord to allow time for work to be done, provided one of the following conditions are met:
- The grant of a tenancy due to prior contractual obligation (this can include a situation such as conditional contract regardless of whether it was entered into before or after the Regulations come into force)
- If a tenant becomes insolvent and a guarantor takes over the tenancy
- A new lease is created by operation of law. Importantly, this extends to situations such as a statutory periodic tenancy starting, which is a deemed tenancy starting beginning when a fixed term assured tenancy (such as a shorthold) runs out and the tenant remains in occupation. It also applies to succession by a family member on death where there is a Rent Act protected tenancy
- As from 1st April 2020 a temporary exemption applies where someone becomes a landlord on purchasing an interest in a property and on the date of purchase it is let on an existing tenancy
In all cases the exemption is for six months from the date when the person becomes the landlord. After six months, the exemption will expire and the landlord must either have during the six month period improved the property or have registered another valid exception or exemption where the property is F or G rated and required to have an EPC.
Registration of exemptions
All exemptions (including temporary exemptions) will be required to be notified to the PRS Exemptions Register which will be operated by the Government. It is planned that this will open from 1st October 2017. It will be essentially a database of exemptions and will be open to public inspection. Failure to register any exemption will render the exemption ineffective, and will amount to non-compliance with the regulations. The Enforcement Authority will be entitled to require landlords to furnish them with evidence supporting a claim for an exemption. Landlords will also be in breach of the regulations if they claim an exemption to which they are not properly entitled.
Where someone becomes a landlord while the exemption is already registered then the new landlord must re-register the exemption. Exemptions claimed by a landlord may not pass over to a new owner or landlord on a sale or other transfer and on transfer they will cease.
Duration of exemption
Exemptions will only endure for 5 years. They will then need to be reviewed to see if they are still effective. If not the work will have to be carried out. If the exemption is lack of tenant’s consent then this will only last for 5 years or the end of the current tenancy, if sooner. As noted above temporary exemptions only last for 6 months.
Principles of the exemptions register
Information placed on the register must be current at the time the exemption is registered. The landlord will have to demonstrate that at the time of registering the exemption the circumstances relied on are applicable. The Regulations lay down what information is required to support the exemption. Enforcement authorities will automatically be notified when an exemption is registered so a landlord registering the exemption may be scrutinized to ensure compliance. Applying to register an exemption to which you are not entitled means you are non-compliant with the Regulations if the property is substandard. In those cases penalties can be imposed accordingly.
Before a landlord can register an exemption on the register they will have to set up a unique user account for the site which will include name and contact details. This account will then enable landlords to register exemptions for one or all properties to manage their exemptions via a single user portal. The landlord is then required to submit information relating to the particular property to be exempt, alongside information and evidence to support the exemption relied upon. The information required for all exemptions is as follows:
- The address of the relevant property
- Which exemption a landlord is registering
- A copy of a valid EPC for the property
An additional exemption and evidence is then required for specific exemptions. This is set out at the end of this Guidance.
A dwelling will not be a Domestic PRS property because it is not let on an assured tenancy in specified circumstances. This means therefore that the Regulations prohibiting letting of individual self contained residential properties that do not attain a minimum E rating will not apply (unless it is one of the other tenancy types within the scope of the Regulations) where they are one of the following types of property:
Let to a company
Holiday lets – these agreements normally form licences rather than tenancies and so are outside the scope.
Second homes – the requirement under an assured tenancy is that the dwelling must be occupied as an only or principal home meaning that second homes are excluded. This is a difficult area and again legal advice will need to be taken on the specific circumstances.
Dwellings let at low rents – if the rent is less than £1,000 in London or £250 elsewhere in England and Wales then the tenancy is not an assured tenancy.
Higher rents – this applies to tenancies where the rent exceeds £100,000 per annum. Where the tenancy was entered into before 1st April 1990 this will apply where the property had a high rateable value, (exceeding £1,500 in Greater London or £750 elsewhere).
Business tenancies – this means the property is let under a tenancy which qualifies for protection under the Landlord & Tenant Act 1954 rather than the Housing Act 1988.
Agricultural tenancies – land exceeding 2 acres is let together with the dwelling.
Resident landlords – This applies where the accommodation rented out is a converted flat (as opposed to a flat in a purpose build block of flats) and the landlord occupies another flat in the same building as his/her only or principal home. This is a complex exemption and specific legal advice will be needed to see if it applies.
Accommodation provided for asylum seekers – this applies where arrangements made under immigration legislation for accommodation to be let to support asylum seekers or their dependants.
Tenancies granted before 15th January 1989 – this was the date on which the Assured Tenancy Regime came into being. In this instance, you need to check particularly whether the tenancy in question is protected by the Rent Act 1977 in which case it can fall within the scope of the Regulations.
This means that in several situations, there will be an exemption from the requirement for a minimum E rating because the letting is outside the scope of the tenancies to which the Regulations apply. These do not need to be registered on a register of exemptions.
Additional information and evidence relating to claiming specific exemptions
The cost of the improvement A copy of any evidence on which the landlord relies to demonstrate that they have been unable to access relevant “no cost” funding to fully cover the cost of installing the recommended improvement or improvements. Where all cost-effective improvements have been made and the property remains below an E Details of any energy efficiency improvement recommended for the property in a relevant recommendation report (separate to the relevant EPC), including a report prepared by a surveyor, or a Green Deal report;
Details, including date of installation, of all recommended energy efficiency improvements which have been made at the property in compliance with the Regulations.
Where the property is below an E and there are no improvements which can be made A copy of the relevant report to demonstrate this (if separate to the relevant EPC). Registering a solid wall insulation exemption A copy of the written opinion of a relevant expert stating that the property cannot be improved to an EPC E rating because a recommended wall insulation measure would have a negative impact on the property (or the building of which it is a part). Registering a consent exemption/tenant consent or other consent which is required A copy of any correspondence and/or relevant documentation demonstrating that consent for a relevant energy efficiency measure was required and sought, and that this consent was refused, or was granted subject to a condition that the landlord was not reasonably able to comply with. Registering a devaluation exemption A copy of the report prepared by an independent RICS surveyor that provides evidence that the installation of a relevant measure would devalue the property by more than 5% Registering an exemption upon recently becoming a landlord The date on which they became the landlord for the property, and the circumstances under which they became the landlord.
From 1 April 2018, the regulations will apply on the granting of
- a new tenancy to a new tenant, and
- a new tenancy to an existing tenant, i.e. any extension or renewal to an existing tenant. This includes a statutory periodic tenancy which comes into existence at the end of the fixed term shorthold.
From 1st April 2020, the regulations will apply to all privately rented property in scope of the regulations.
Where a lease is granted involuntarily by a landlord, for instance due to operation of law, they may be provided with six months to comply after the tenancy is agreed. Similarly, where a non-compliant property occupied by a tenant is sold, or is transferred to a lender in the event of landlord’s default (e.g. if a receiver is appointed), the new landlord will have six months to improve the property, or seek to demonstrate an exemption applies.
Note: The Regulations actually came into force on 1st October 2016. This is purely for the purpose of allowing landlords to claim exemptions early so that they had their exemption claim in place prior to implementation on 1st April 2018.
Local authorities will enforce compliance with the regulations.
Where a landlord considers an exemption applies, the landlord will need to provide such evidence to a centralized register, the “PRS Exemptions Register”. Landlords may be required to submit relevant evidence and details of their exemption to the Register. The Government may use this information to assist local authorities in targeting their enforcement activity.
Compliance Notices and Penalties
Where a local authority suspects that a landlord with a property in scope of the regulations is not compliant, or has not sufficiently proved an exemption, the local authority can serve a compliance notice on the landlord requesting further information it considers necessary to confirm compliance. If it is not provided, or is provided and is not sufficient to provide compliance, the local authority may proceed to issuing a penalty notice.
Penalties for a single offence may be cumulative, up to a maximum of £5,000. Further penalties may be awarded for non-compliance with the original penalty notice where a landlord continues to rent out a non-compliant property; however, penalties would be cumulative up to a maximum of £5,000. The landlord can be awarded a further penalty when one of the following events occurs:
- The tenant changes
- The regulatory backstop comes into effect
The penalty regime for non-compliance with the regulations will be as follows:
Infringement Penalty Providing false or misleading information to the PRS Exemptions Register £1,000 Publication of non-compliance Failure to comply with a compliance notice from a local authority £2,000 Publication of non-compliance Renting out a non-compliant property (Less than 3 months non-compliance) £2,000 fixed penalty Publication of non-compliance Renting out a non-compliant property (3 months or more of non-compliance) £4,000 fixed penalty Publication of non-compliance
NB: The penalty amounts are fixed and do not vary according to the severity of the contravention.
Upon receiving a penalty notice from a local authority, a landlord may request a review of the local authority’s decision to serve the notice. If a landlord requests a review, the local authority must consider any representations made by the landlord and all other circumstances of the case, decide on whether to confirm the penalty charge notice, and give notice of their decision to the landlord.
If the local authority is not satisfied that the landlord committed the breach specified in the notice, or it was not appropriate for a penalty charge notice to be served given the circumstances of the case, they must withdraw the penalty notice. If the local authority is still satisfied that the landlord committed the breach, but the landlord still believes the penalty notice is incorrect, the landlord may proceed to the appeals process.
Landlords may appeal any penalty notice on the basis that the penalty notice was issued in error (error of law or fact), the penalty does not comply with the Regulations, or that it was inappropriate in the circumstances for the penalty notice to have been served. The appeal would be heard at the First-Tier Tribunal (General Regulatory Chamber).
Improvements which can be required
The following improvements are those which a landlord can carry out and which are eligible to qualify to comply with the Minimum Energy Efficiency Standards:
- Air source heat pumps
- Thermostat boilers
- Thermostat room heaters
- Cavity wall insulation
- Solid wall insulation (internal or external)
- Cylinder thermostats
- Draught proofing
- Duct insulation
- Hot water showers/systems (efficient)
- Hot water taps (efficient)
- External wall insulation systems
- Fan assisted replacement storage heaters
- Flue gas recovery devices
- Ground source heat pumps
- Heating controls (for wet central heating systems and warm air systems)
- Heating ventilation and air conditioning controls
- High performance external doors
- Hot water controls (including timers and temperature control)
- Hot water cylinder insulation
- Internal wall insulation (or external walls)
- Lighting systems fittings and controls (including roof lights, lamps and luminaires)
- Loft or rafter insulation (including loft hatch insulation)
- Mechanical ventilation with heat recovery
- Micro combined heating power
- Micro wind generation
- Pipework insulation
- Gas fired condensing boilers
- Replacement glazing
- Oil fired condensing boilers
- Warm air units
- Radian heating
- Roof insulation
- Warming roof insulation
- Ceiling improvements (including duct ceiling)
- Secondary glazing
- Solar water heating
- Solar blind, shutters and shading devices
- Transpired solar collectors
- Under floor heating
- Under floor insulation
- Variable speed driers for fans and pumps
- Waste water heat recovery devices attached to showers
- Water source heat pumps
GUIDE TO MINIMUM ENERGY PERFORMANCE STANDARDS/EPCs FOR LISTED BUILDINGS ETC
(with thanks to the Residential Landlords Association for this article at www.rla.org.uk)
It is unclear whether landlords of listed buildings have to provide EPCs to their tenants when the property is rented out. It is also unclear whether landlords of listed buildings are subject to the Minimum Energy Efficiency Standards which take effect from 2018 onwards. From April 2018 for new lets and from April 2020 for existing lets the property will have to have a minimum E rating but these standards only “bite” if a property has an EPC. There will also be an exemption to prevent excessive sums having to be spent on works but as yet no details of this are settled. As from the 1st October 2015, in order to rely on Section 21 to regain possession, you must have supplied an EPC to the tenant, if one is required.
The requirement for an EPC
The legal basis in the United Kingdom for the requirement for energy performance certificates on the sale or letting of buildings are contained in the Energy Performance of Buildings Directive (Recast) 2010/31/EU. This lays down, among other things, a common methodology for assessing the energy performance of buildings. Paragraph 1 of Article 4 to the Directive headed “Setting of Minimum Energy Performance Requirements” lays down a number of measures which member States are required to implement. These include –
- Ensuring that minimum energy performance requirements for buildings are set and that energy performance is to be calculated in accordance with the methodology referred to in Article 3 of the Directive.
- Ensuring that minimum energy performance requirements are set for building elements. Member States can differentiate between new and existing buildings.
Paragraph 2 stipulates that Member States may decide not to set or apply these requirements in certain categories of buildings, including “Buildings protected as part of a designated environment or because of their special architectural or historical merit, insofar as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance”.
Member states are required to see that these requirements are complied with in the case of new buildings or substantial refurbishments. In practice for listed buildings this means the EU dimension is only potentially relevant to renovations which an owner may choose to carry out and is not relevant to across the board mandatory minimum energy efficiency requirements.
Under Article 11 (Energy Performance Certificates) Member States are required to lay down measures to establish a system of certification of the energy performance of buildings. Energy performance certificates are to include the energy performance of a building. The certificate must include recommendations for improvements.
Article 12 (Issue of Energy Performance Certificates) goes onto provide that Member States must ensure that an EPC is issued for buildings which are constructed, sold or rented out to a new tenant. When buildings are constructed, sold or rented out the EPC or a copy of this must be shown to the prospective new tenant or buyer and handed over to them.
Importantly, Paragraph 6 of Article 12 provides “Member States may exclude the categories of buildings referred to in Article 4(2) from the application of paragraphs 1, 2, 4 and 5 of this Article.” Paragraph 1 requires the issue of an EPC. Paragraph 2 requires that the EPC is produced/handed over when a property is, amongst other things, rented out. Paragraph 4 stipulates that the energy performance indicator of the EPC must be stated in advertisements for, amongst other things, rent. Paragraph 5 relates to jointly owned property.
EPCs and Minimum Energy Efficiency Standards
Whilst EPCs are key to the implementation of minimum efficiency standards in the PRS, because of them being triggered by a low EPC rating, the legislation requiring these is not of European origin. It is imposed by domestic UK legislation under the Energy Act. 2011. However, under that Act it is a prerequisite for having to comply that there is a valid EPC in the first place.
It should be noted that beside listed buildings etc., other buildings are exempt such as places of worship, temporary buildings, short term use residential buildings and small buildings.
When it comes to minimum energy efficiency requirements it makes sense to exempt listed buildings from the requirements which must be devised under Article 4 insofar as compliance with these requirements would unacceptably alter the character or appearance of the building. Simply having an EPC prepared and issued could not damage the building. This kind of qualification only appears in the case of protected/listed building; not in any of the other Article 4(2) exemptions There is no similar qualification in respect of the other types of exempt buildings listed out in Paragraph 2 under Article 4. There are other qualifications but these relate to by whom and how the building is used so they do not pose any similar difficulty in interpreting exemptions.
When it comes to the Article 12 exemption from the need to obtain/issue an EPC the reference is to excluding “the categories of building” referred to in Article 4(2). The reference is to categories of building. When it comes to interpreting Article 4 exemptions for the purposes of the Article 12 exemption provisions it could therefore be argued that it makes sense to omit the qualification “insofar as compliance with certain minimum energy efficiency requirements would unacceptably alter their character or appearance”. This is about the categorisation of work which can be done to the building; not the building’s categorisation.
Therefore, if this is legally the permissible approach, in the context of the Paragraph 6 exemption in Article 12 it should be read as giving authority to exempt “buildings officially protected as part of a designated environment or because of their special architectural historical merit” from the scope of the need to issue/provide an EPC disregarding the caveat as this is nothing to do with the category into which the building falls. After all the caveat is about categorising the nature of the requirements themselves and not the nature of the building.
Implementation in the UK
It needs to be stressed that exemptions are discretionary so a Member State can decide whether or not to take advantage of them.
The provisions of the Directive (i.e. in respect of EPCs but not minimum energy efficiency requirements) are implemented in England and Wales by virtue of the Energy Performance of Buildings (England and Wales) Regulations 2012. Regulation 5 (application of Part 2) states that this part does not apply to buildings officially protected as part of a designated environment or because of their special architectural historical merit, insofar as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance. This is a copy out from the terms of the Directive itself, in line with Government policy to implement directives generally by “copy out”. Part 2 requires –
- An energy performance certificate on sale and rent.
- An EPC on marketing.
- Provisions to what an EPC must incorporate.
- Display of EPCs in larger buildings used by the public.
- Provision of the EPC indicator in advertisements.
- Production or copies of EPCs.
As can be seen none of these duties could be said to endanger the fabric of protected/listed buildings. Nevertheless, the caveat has been copied out as if it were an exemption from the requirements under Article 4 which can involve physical interference with the building, as opposed to an exemption from the requirements under Article 12 relating to EPCs and their production.
However, this is what the UK spells out so, on the face of it the regulations therefore only exempt listed buildings from the need to provide an EPC where you can demonstrate that it would not unacceptably alter the character/appearance of the building, which is a palpable nonsense. If they were exempted from the requirements how could you know which building is or is not exempt?
Would the UK be in breach of the directive if the exemption simply referred to listed buildings?
Article 12 does give the discretion to the UK Government to exclude certain categories of buildings and it is this cross reference under this exemption under Article 12 to the exemption under Article 4 which is causing the problems.
History of the exemption
The history of how this came about is set out in the Impact Assessment regarding the introduction of the recast Directive. The exemption did not appear in the earlier EPC Regulations. This is attached. It focuses on Article 4; not the Article 12/13 provisions which actually relate to EPCs. The figures in the Assessment assume that ALL listed buildings are exempt!
Resolving the problem
As already indicated, this dilemma could arguably be solved by simply omitting the caveat regarding unacceptable alterations. Then the reading of Article 12 would be such that the exemption can be legitimately framed in the terms of the category of the building itself. So, all listed buildings would be exempt, rather than determining exemptions by the nature of works and whether they may or may not affect its character/appearance. However, the UK has not so far done this in the UK Regulations, which, taken at their face value, only exempt them in terms of the caveat. This is because of the discretion accorded to the UK to determine whether to apply exemptions.
So in reality, in terms of an EPC, the caveat is meaningless. Therefore, a landlord cannot know if an EPC is needed before they have an EPC for the property.
In any case an EPC does not determine what the Article 4 requirements are. This is the function of building regulations. All an EPC does is assess the rating, and separately make recommendations on work which may be done within the requirements. On the other hand, landlords can pre-classify works in accordance with efficiency improvement requirements laid down to comply with Article 4. This allows a landlord to determine in advance whether or not the building can be damaged as a consequence. Implementation of any requirements can then be planned accordingly.
It is arguable that the UK Government has chosen to implement the exemption in relation to the preparation of EPCs in terms of likely damage so that in effect all protected/listed buildings to be rented out or sold have to have an EPC because the conditions of the UK formulation of the exemption will never be met. The simplest solution therefore is to omit the caveat in Regulation 5 (Paragraph (a)) so that the qualifying words regarding unacceptable alterations are omitted. The UK Government would have to be persuaded that this is permissible based on the argument set out above.
Implementing Minimum Energy Efficiency Standards
The UK Energy Act 2011, which has nothing to do with EU law, allows for exemptions to be prescribed by Regulations in relation to PRS minimum energy efficiency standards. In their response to the consultation when the Minimum Energy Standards Regulations were introduced, the Government stated that they proposed to mirror the scope of the Energy Performance of Buildings (England and Wales) Regulations 2012 so only those buildings which may be required to obtain an EPC will be in scope. They then listed these out and again the caveat regarding unacceptable alterations to the character or appearance of the building was added. This clearly conflicts with what the Minister said at the time but the Regulations must prevail over what was announced.
We also need to bear in mind that Guidance on the need for EPCs was published “Improving the energy efficiency of our buildings”. This was published in April 2014. This states that an EPC is generally not required where a building is protected as part of a designated environment or because of their special architectural or historical merit where compliance with certain minimum energy efficiency requirements would unacceptably alter their character or appearance. In other words, it is yet another copy out from the EPC Regulations, repeating the Directive again.
The Listed Building “Exemption” for Minimum Energy Efficiency Standards
The relevant regulations containing the exemption from the minimum standards made in the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. In effect there is a cross reference to the energy performance of building regulations relating to EPC requirements.
The application of the minimum standards which is purely UK domestic legislation is framed by what is domestic PR property and non-domestic property. This is provided for in Section 42 of the Energy Act 2011. In the case of domestic PR property this is property let under certain types of tenancies (e.g. an assured shorthold). Under Section 43 of the 2011 Act the Secretary of State must make regulations for the purposes of securing that a landlord of a domestic PR property may not let a non-compliant property. This is to apply to such description of domestic PR properties as is provided for in the regulations in relation to which there is an EPC in place. The property must then fall below the level of energy efficiency (ascertained under an EPC), i.e. below an E rating. Key therefore to the application of the regulations is not only the existence of an EPC, but also that they must fall within the prescribed description of dwellings which rank as a domestic PR property. The supposed exclusion for listed buildings is described in the same terms as in the EPC Regulations.
The relevant regulation is Regulation 19 of the Energy Efficiency (Private Rented Sector England and Wales) Regulations 2015. It states “for the purposes of the Act (i.e. the Energy Act 2011) domestic PR property means property which is within Section 42(1) of the Act subject to Paragraph (2))”.
Importantly for our purposes Paragraph (2) goes onto say that the property is not a domestic PR property if –
- It was not required and is not part of a building which is required to have an EPC by the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 (the predecessor EPC regulations) and
- It is not required and is not part of a building which is required to have an EPC by the Building Regulations or the EPB Regulations (i.e. the 2012 Energy Performance and Building Regulations which are currently governing EPCs.
The EPB Regulations provide an exemption under Regulation 5(1)(b) for “buildings protected as part of a designated environment or because of their special architectural or historical nature, insofar as compliance with certain minimum energy performance requirements would unaccepted alter their character or appearance”.
It is important to note the words “insofar as” because this suggests that if there would be no unacceptable alterations then work could be done.
In terms of a listed building this would mean that if there was a roof space then loft insulation would be possible. On the other hand, external cladding or internal solid wall insulation could well damage the fixtures of the building unacceptably. There are not likely to be cavities in most of the listed buildings. Double glazing is normally unacceptable. Secondary glazing may be acceptable depending on the circumstances.
Importantly, the legislation is silent as to who makes the judgment.
The two paragraphs above also raise a particular problem because on the face of it they are conjunctive. The earlier 2007 regulations did not include any exemption for listed buildings. Therefore, because these are apparently conjunctive provisions, arguably they would not comply at all. They only fall within paragraph (b) potentially; not paragraph (a). Can the word “and” in this context be read as “and/or”? “And” does not necessarily have to be conjunctive, so both requirements do not necessarily need to apply. It is accepted as a right interpretation that in some instances it can be disjunctive, meaning that one or the other may apply.
Therefore, again, the result is that a number of further uncertainties are introduced by the actual wording of the exemption. Similar issues of course arise in the case of rented dwellings in conservation areas although more extensive work may be possible as these essentially protect the exterior rather than the interior of properties.
Impact on landlords
In a recent survey of our members regarding the implementation of energy efficiency minimum performance standards, considerable concern was raised by members about the application of the regulations to listed buildings. Not unsurprisingly a number pointed out the considerable practical difficulties, as well as legal constraints, around the works to listed buildings.
No need to comply if there is no EPC
The conundrum is that the exemption under those Regulations is yet again a copy out which is therefore in effect transposed into these regulations which lay down the requirements for the Minimum Energy Efficiency Standards. The regulations implementing Minimum Energy Efficiency Standards have to be read in terms of the Energy Act 2011 itself. Under Section 43(1) of that Act not only does the property have to fall within the description of domestic privately rented property as provided for in the relevant regulations but there has to be an EPC in relation to the property, i.e. one actually in existence. Therefore, if you rely on the supposed exemption under the Energy Performance of Building Regulations to say that you are exempt from having an EPC, you are also in effect saying that you are exempt from compliance with the minimum energy performance requirements if they would otherwise apply. If you actually have an EPC you then have to consider whether, notwithstanding, the exemption applies should you have an F or G rating. The penalty for not having an EPC is much lower than the one for failing to comply with the minimum standards after all! It is better not to have an EPC.
Even if you have an EPC for whatever reason, you are also exempt from having to comply with these minimum standards if you were not required to have one in the first place (notwithstanding that you actually have one). This, however, unfortunately brings us back to the ever repeated caveat regarding unacceptable alterations for the character/appearance of the building. In this context, however, the exemption does make sense. Works that do not damage the character/appearance have to be carried out to meet minimum energy efficiency requirements, but those that would adversely affect the building do not. However, this brings us back to the same point. This simply does not make sense when it comes to categorising or describing a building although it does make sense when categorising a particular requirement e.g. external solid wall insulation.
Unfortunately, however, the wording of the exemption from the minimum standards relating to protected/listed buildings is phrased in terms of the need or otherwise for an EPC rather than the consequences of the works themselves.
No need to link the exemption to EPC exemptions
The confusing wording in the Directive itself around the exemptions for listed building is far from helpful and is the start of the problem. Coupling the minimum energy efficiency requirements under the 2011 Act with the EPC exemption is at the heart of the problem. There is no need for this link. The Energy Act is not implementing EU requirements. Whatever may be the issue around the EPC exemption which is potentially an EU issue, the regulations which implement the minimum standards could simply contain a standalone unqualified exemption for listed buildings which would solve the problem. Whether the UK Government would agree is another matter as they may make a policy decision that they want to see substandard listed buildings comply to the extent that the work does not adversely affect the character or appearance of the building.
Clarity can only be achieved by amending the regulations but this can be done without involving the EU so far as minimum standards are concerned.
The implications for Section 21
A further concern for landlords renting out properties under an assured shorthold tenancy is that from the 1st October 2015 certain additional requirements were introduced which have to be complied with if you wanted to serve a valid Section 21 notice to evict a tenant. These include providing a copy of the EPC. This requirement does not affect tenancies which started before the 1st October 2015. The regulations would, however, only apply if an EPC was legally required for a listed building. Exactly the same uncertainty, however, applies. If an EPC is required for a listed building and one has not been provided, then a Section 21 notice served by the landlord would be ineffective. The landlord can put the situation right by providing an EPC to the tenant. However, the same issue of uncertainty around the scope of the exemption clearly applies in this situation.
Regrettably, we simply do not know the answer to whether or not an EPC is required for a listed building; nor whether landlords who have rented out listed buildings will have to comply with Minimum Energy Efficiency Standards (subject to any other available exemption, e.g. limiting the amount they have to spend); or whether you need an EPC for a listed building in order to be able to rely on regaining possession under Section 21 of the Housing Act 1988. What is clear is that if you have no EPC then you do not have to comply with Minimum Energy Efficiency Standards from 2018 onwards. You could be liable for a penalty for not having an EPC and equally you might not be able to get possession back relying on Section 21. This is a wholly unsatisfactory state of affairs which needs to be addressed by the Government.
EPCs on properties for sale – 10 Year Validity REMINDER
EPCs started on 1st August 2007 and are valid for up to 10 years. So some will start to expire from 1 August 2017. We would like to remind you that some “For Sale” properties which have EPCs may be close to running beyond their 10 year validity date during marketing and before exchange.
Therefore some pre-marketing date checks of EPCs (for sale) will soon be required to avoid potential problems and fines.
You may remember that EPC were phased in over a few months starting with 4 bedroom + properties.
Properties taken on for sale after the following dates will require their existing EPCs replaced if the latest EPC on the Landmark Register is over 10 years old.
4 Bedroom + Properties – some EPCs become out of date from 31 July 2017 (EPC requirement started 1 Aug 2007)
3 Bedroom Properties – some EPCs become out of date from 9 September 2017 (EPC requirement started 10 Sept 2007)
Remainder Properties – some EPCs become out of date from 13 December 2007 (EPC requirement started 14 Dec 2007) .
This will require a physical check not only of the existence of a current EPC but also the date it was produced. See the Landmark Register : www.epcregister.com
The Department for Business, Energy & Industrial Strategy (BEIS) has released guidance on the application of the Minimum Energy Efficiency Standards (MEES) for non-domestic buildings. In this document, they cast doubt on the interpretation favoured by the Department for Communities and Local Government (DCLG) on the requirement for EPCs for listed buildings.
The Alliance has long been arguing that an EPC is required for the majority of listed buildings under the existing Energy Performance of Buildings Regulations. We have seen the DCLG gradually backing away from the stance that “if it is listed it is exempt” but unlike BEIS they have not yet issued clear guidance stating otherwise.
The confusion stems from the paragraph in the regulations stating that EPCs are not required for
“buildings officially protected as part of a designated environment or because of their special architectural or historical merit, in so far as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance”
Whilst clearly a listed building is officially protected for its architectural or historical merit it is the second part of the sentence that is all important. As BEIS rightly state in their guidance
“Examples of energy performance measures which may alter character or appearance … include external solid wall insulation, replacement glazing, solar panels, or an external wall mounted air source heat pump.”
The guidance then goes on to point out that
“Where character or appearance would not be altered by compliance with energy performance requirements, an EPC may be legally required.”
Well hooray! The penny has finally dropped. There are literally thousands of energy inefficient listed properties out there where things like loft insulation or upgrading heating and/or hot water systems can make a significant difference; without altering their character. The people living in those properties need them more energy efficient and the country can’t afford for those properties not to be upgraded if we are going to meet our targets.
It would clearly be ridiculous to completely exclude a large proportion of our least efficient buildings from the requirement to make them more energy efficient if it is reasonably possible to do so. That is why the regulations only exclude them if it is not reasonably possible to do so; and we are pleased that BEIS has finally recognised this and issued appropriate guidance.
What we now need is similar clarification from the DCLG. In the meantime, assessors should not risk telling clients that if their property is listed they don’t need an EPC for sale or rental. That advice could prove to be incorrect, making the assessor liable. The safe approach is to state that
If your building is listed, then it may be exempt from needing an EPC (for sale or rental) however the legislation is not entirely clear on this point and it is for your solicitor and the solicitor for the other party to determine whether they believe one should be produced.
An assessor could add that there is no risk in obtaining an EPC that was not actually needed whereas there is a risk in not obtaining one if it is deemed you should have. Again, BEIS are ahead of the game on this one and their guidance confirms that
“In situations where an owner or occupier of a building which is not legally required to have an EPC has obtained one voluntarily … the landlord will not be required to meet the minimum standard.”
At last we are seeing some common sense being applied to what has been one of the most contentious issues for EPCs.
The guidance referred to in this article is
THE NON-DOMESTIC PRIVATE RENTED PROPERTY MINIMUM STANDARD
Guidance for landlords and enforcement authorities on the minimum level of energy efficiency required to let non-domestic property under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015
The Alliance of Energy Assessor Associations
25 February 2017