Martyn Reed, Managing Director of the UK’s largest energy assessor scheme, Elmhurst Energy, looks at energy efficiency legislation affecting landlords.
Since 1st April 2016, all domestic tenants have had the right to request consent for energy efficiency improvements. This applies to all privately rented domestic properties let under an assured tenancy and a regulated tenancy. This will be widened to cover an assured agricultural occupancy, protected tenancy and statutory tenancy.
Five Ways to Comply with Energy Efficiency Legislation
There are some exceptions. If the building is exempt from having an Energy Performance Certificate (EPC), then a landlord is not required to provide consent. Your tenant must also show that the measures could be installed with no upfront cost to the landlord.
In January 2017, the Government announced that the Green Deal Finance Company (GDFC) had been sold to Greenstone Finance and Aurium Capital Markets, and money was available to invest. Under the law, residential private landlords cannot unreasonably refuse consent to a tenant’s request for energy efficiency improvements if the various criteria are met. It’s imperative therefore that landlords are aware of their obligations and do not get caught out by these changes.
Coupled with this legislation, from 1st April 2018, the minimum EPC rating for private rental properties will be set at a band E. The regulations will initially only apply upon the granting of a new tenancy to a new tenant and a new tenancy to an existing tenant. However, from 1st April 2020, the regulations will apply to all privately rented property within scope, which are those that have an EPC or are required to have an EPC as per existing EPC legislation. While some exemptions apply (including where improvement measures would devalue the property by more than 5%, or where properties are unsuitable for wall insulation), there are penalties if regulations are not met, with fines up to a maximum of £5,000.
Green Deal financing has the potential to help landlords and letting agents requested by tenants to install energy efficiency improvements or, as of April 2018, landlords who own properties that fall below the new minimum energy efficiency (EPC) rating of E. The loans are more easily managed, as they are repaid as part of a customer’s energy bill, which will normally be reduced by the energy savings generated from the measure the loan has financed – a pay-as-you-save scheme. Furthermore, the loan remains with the property and is paid by the energy bill payer, ensuring the payments are made by the person who benefits from the energy saving.
Landlords and letting agents should not see the energy efficiency measures as punitive. Remember, energy efficiency measures do require some initial outlay, but will save your tenants money, make their home more comfortable and add to the value of your property in the long run. Think of them as an investment in your business.
Hints and tips
- Use an Elmhurst-accredited energy assessor to produce an EPC. It is recommended that you only rely on a recent EPC, as changes in the building, technology and fuel prices can all impact the EPC recommendations. You can find an energy assessor in your area via a search facility here: elmhurstenergy.co.uk.
- Register your interest for Green Deal financing at: http://gdfc.co.uk/
- Don’t get caught out by the Deregulation Act, as EPCs are central to this legislation too. As a landlord entering a short-term tenancy, you risk losing your right to issue an eviction notice under Section 21 if you have not complied with all your legal obligations, including the provision of an EPC.
- If your property does not reach energy efficiency rating band E, plan for energy saving measures, such as cavity wall, loft insulation, hot water, cylinder insulation or double-glazing. Your EPC will indicate options including estimates of cost, payback and the predicted improvement in your rating.
- Landlords with multiple properties may consider using energy efficiency software such as Elmhurst’s Streamline EPC, which can help you to calculate the effect of improvements over your portfolio of properties.