In July 2014, the Government published a consultation on a proposal to introduce two sets of Regulations relating to private rented sector energy efficiency. The Regulations stem from powers at sections 43 to 46 of the Energy Act 2011 to introduce two key laws:
- Domestic Tenant's Energy Efficiency Improvements: Regulations to limit the circumstances in which a landlord can refuse a tenant's request to install Green Deal measures from 1 April 2016; and
- Domestic Minimum Energy Efficiency Standard: Regulations to require Landlords to make energy improvements to properties before they can be rented from 1 April 2018.
Although the powers in the Energy Act 2011 were met with concern by landlords, the detailed proposals in the Government consultation lacked any real bite due to proposed exemptions related to the requirement on the Landlord to pay any upfront costs and where the Landlord can show that the installation of measures will cause a net material decrease in the property's capital or rental value.
The draft Domestic Tenant's Energy Efficiency Improvements Regulations provide:
- from 1 April 2016, tenants can compel a landlord to consent to the installation of Green Deal measures
- the measures must be entirely financed through a Green Deal loan and any available funding such as ECO, without an upfront cost to the landlord (unless the tenant chooses to pay any up-front costs)
- the landlord does not have to give consent if the landlord can show that the installation of measures will cause a net material decrease in the property's capital or rental value.
The draft Domestic Minimum Energy Efficiency Standard Regulations provide:
- for new tenancies starting on or after 1 April 2018 (and for all tenancies after 1 April 2020), landlords will have to install measures to improve the energy efficiency rating of a property up to an EPC E rating (properties are rated from A to G)
- these measures must be entirely financed through a Green Deal loan and any available funding such as ECO, without an upfront cost to the landlord (in which case the landlord will only have to install such measures as would not involve an upfront cost), and
- the landlord will not have to install measures if the landlord can show that the installation of such measures would will cause a net material decrease in the property's capital or rental value.
One of the most controversial proposals prior to the consultation had been the EPC E rating minimum standard. However, the proposals in the consultation in fact only provide for a standard which is the lower of EPC E rating and the EPC level which can be funded through a Green Deal loan at no upfront cost.
While these proposals are likely to ease any significant impact on landlords, they could be met with criticism from tenant stakeholder groups and Green Deal Providers that the Government has not gone far enough in its commitment to "tackling the root causes of fuel poverty." The 'no upfront cost' limitation could lead to the least energy efficient homes escaping improvement and the proposals pushing the cost of improving Britain's homes onto tenants, not landlords, who will be paying the energy bills.
Labour has proposed a requirement for landlords to upgrade the standard of rented properties to a band C by 2027, although it is not yet clear whether this would be subject to the same 'no upfront cost' limitation.