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New Green Policies to Restrict Landlords’ Ability to Rent

Posted on June 27th 2017

Stricter Energy Performance Certificate rules will be introduced to help protect the environment, but may prevent landlords from renting their property if they fail to meet standards.

What are energy performance certificates?

Energy Performance Certificates (EPCs) were introduced in England and Wales in August 2007. Subject to certain exceptions, all homes that are made available for sale or rent within the UK must have one.

The concept is quite straight forward. An EPC is an assessment of the energy efficiency of a property based on its construction, the type of dwelling it is, and the relevant installations it has. Installations may include any heating systems, insulation, and windows. The assessment is not a survey or valuation and once produced, the certificate is publicly available.

The certificate provides a current and potential energy efficiency rating from A-G and an environmental impact rating from A-G (‘A’ being the best).

Once produced the certificates are valid for 10 years. Whilst the property owner may have received recommendations on how to improve the energy efficiency and the potential return for doing so, originally there were no statutory obligations to carry out any improvements.

Original Green Changes – The Energy Act 2011

You could be excused for missing out on the Energy Act. It was introduced in 2011 to help reduce growing greenhouse gas emissions in the UK. In 2009 approximately ¼ of UK’s greenhouse gas emissions were produced by domestic buildings. A further 12% were produced by non-domestic buildings.

The Act was introduced in October 2011 and implemented the coalition government’s flagship ‘Green Deal’ policy. It was responsible for arranging and financing improvements to the energy efficiency of properties.

April 2018 – Minimum Energy Efficiency Standards Will be Introduced

Following the Energy Act, the Energy Efficiency Regulations 2015 introduced measures to improve the standards of domestic and non-domestic properties.

These regulations set out improvements to properties at the lower end of the spectrum of EPC assessments (ratings of F or G). The MEES Regulations 2015 set various milestones for these measures.

As a result, in the private rented sector (residential) from 01 April 2018 it will be unlawful to create or renew tenancies where a property has an EPC rating of F or G. Therefore, unless they can show an exemption applies, Landlords in breach of this can receive:

  • A civil penalty of £5,000 or 10% of the rateable value of the property up to a maximum of £50,000.00; AND
  • A publication penalty – this is where the local authority would publish details of the breach along with the landlord’s name and the offending property

Both penalties will be imposed by the local weights and measures authority.

A Note of Caution For Investors

So, investors looking to buy properties with a low EPC rating should now be aware that this comes at a price. This is especially true when you consider the frequency at which short-term residential tenancies are renewed (either 6 monthly or annually).

From the 01 April 2020 the new measures will also extend to tenancies already in existence. Careful consideration must be given to:

  • The impact on the value of a property.
  • Certain legal elements that restrict alterations to the property i.e. whether the property is leasehold or freehold or whether there are restrictions on the freehold title. Our property experts can advise on these legal aspects.

Consideration will also need to be given when investing in properties that are near to the EPC boundary.

How Can You Improve The EPC Rating of Your Property?

Recommendations can range from replacing the boiler to installing new double-glazed windows. We do not advise on EPCs or their recommendations. However, we do have access to and work regularly with a wide range of professionals who are able to offer guidance and advice on the impact of the new EPC obligations.

For more information the Government has also issued guidance to Landlords on the GOV.UK website:

https://www.gov.uk/government/publications/the-non-domestic-private-rented-property-minimum-standard-landlord-guidance

For any more information or advice on selling or letting your leasehold property please contact us today on 01244 312306.

Call and speak to a lawyer on 01244 312306