From 1 April 2018 it will be illegal to rent a private property (domestic or non-domestic) below the minimum energy performance rating of E on an Energy Performance Certificate (EPC). The regulations apply from 1 April 2018 to new lets and renewals of tenancies. For all existing tenancies, the date for compliance will be 1 April 2020.
When are energy efficiency improvements compulsory?
If any time after 1 April 2018, a landlord lets a privately rented property, (domestic or non-domestic) which is rated either F or G on a current legally required EPC, then the 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 one of the exemptions mentioned below.
A letting of property includes the following;
• A new, renewed or extended assured tenancy including an ‘AST’;
• A statutory periodic tenancy comes into existence, following the end of a fixed term assured tenancy;
• A new assured tenancy by succession (when a family member takes over a Rent Act protected tenancy) or when 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.
If the letting is not an assured tenancy (shorthold or not) or one of the other tenancy types above, then the minimum energy performance rating does not apply.
Energy efficiency improvements on continuing tenancies
From 1 April 2020 on domestic tenancies and 1 April 2023 for non-domestic tenancies, the minimum energy performance rating requirement will also apply to continuing tenancies, where there is a valid current EPC for the property and an EPC is legally required. The property must be brought up to the minimum E rating to comply with the regulations, unless an exemption is available and is claimed by being registered in the Public Exemptions Register.
Rules on voluntary EPCs
The requirement to carry out energy efficient improvements will arise where there is a valid EPC, i.e. less than 10 years old and the property requires one because:
• The property is being let or has been let in the past;
• The property has been sold;
• Improvements have been made to the property and building regulations required an EPC.
When a Landlord obtains an EPC but are not legally required to have one, the Landlord will not be required to meet the minimum standard. The Landlord may register the voluntary EPC on the official EPC database but there is no requirement to do so and it will supersede any earlier EPC for the property.
Exemptions and exclusions
The following buildings are excluded from the scope of the requirements:
• Temporary buildings with an intended use of 2 years or less;
• Residential buildings which are intended to be used less than 4 months of the year;
• Buildings or monuments which are protected (e.g. due to their architectural or historical distinction);
• Stand-alone buildings with a total usable floor area of less than 50 square meters.
Landlords are granted a 5 year exemption if one of the following scenarios apply:
• The Landlord has undertaken works which are ‘cost-effective’ but remain below an E rating;
• When consent is required by the Tenant and they withhold that consent;
• Where the Landlord is unable to obtain funding through the Energy Company Obligation (ECO), Green Deal Finance or Local Authority grant;
• Installation of wall insulation is not required when a written opinion from a qualified person or installer advises that it is not appropriate due to potential impact on the structure or fabric of property;
• Improvements to the property (as evidenced by a qualified independent surveyor) are expected to cause a devaluation of more than 5% of the property.
New Landlords are granted a temporary 6 month exception when:
• A tenant becomes insolvent and a guarantor takes over the tenancy;
• A new lease is created by operation of the law e.g. statutory periodic tenancy.
• The Tenancy is due to a prior contractual obligation;
• As from 1 April 2020, there will be an exemption where someone becomes a Landlord on purchasing a property and on the date of purchase it is let on an existing tenancy.
After the exemption time limit expires, the Landlord will be required to either bring the property EPC up to a rating of E or higher or apply for a further exemption. All exemptions including temporary exemptions, need to be registered to the PRS (Private Rented Sector) Exemptions Register and failure to register the exemption will make the exemption invalid. Any new Landlord of a property where an exemption is registered must re-register the exemption as they do not transfer on a sale.
If the local authority suspect that a Landlord’s property is not rated E or above or they have not adequately proven an exemption, they can serve a compliance notice on the landlord requesting further information. If the information is not provided or is provided and is not sufficient, the local authority may issue a penalty notice. The penalties for a single offence can be up to a maximum of £5,000 and further penalties can be issued for non-compliance with the original penalty notice, but cannot cumulatively exceed £5,000.