Regulations introduced under the Energy Act 2011 prohibit the letting of properties with an Energy Performance Certificate rating below E (i.e. those currently rating F or G).

The bottom line:

Financial penalties for non-compliance: up to £5000 for domestic properties and up to £150,000 for non-residential.

Key dates:

  • From 1 April 2018: unlawful to grant, extend or renew a lease of properties with an Energy Performance Certificate 'EPC' rating of F or G (known as the 'soft start')
  • From 1 April 2023: unlawful to continue letting a property with an EPC rating of F or G (known as the 'hard start')

Exclusions:

  • Leases of six months or less (but only where the tenant does not occupy the property for 12 months or more) and leases of 99 years or more.
  • Where a building is already exempt from obtaining an EPC (e.g. a listed building).
  • Any social housing

Exemptions:

The exemptions below are valid for five years only after which the Landlord must carry out the works or reapply.  Exemptions are only recognised if the landlord registers them on the PRS Exemptions Register. 

  • Where all relevant energy efficiency improvements have been undertaken, or where none exist. This is tested on whether the expected energy bill savings exceed or equal the cost of works.  
  • Domestic properties only:  all relevant energy efficiency improvements have been made that can be wholly financed by other means (e.g. via the Green Deal or Energy Saving Trust schemes)
  • Where the Landlord is itself a tenant: and has been unable to obtain the consent of other relevant parties (Local Authority, Superior Landlord etc.).  Beware - the exemption will only apply to the element of the works requiring the superior Landlord's consent.  All other aspects of the works need to be carried out.
  • If improvements cause a 5% or more decrease in the market value of the property (as judged by an independent surveyor)
  • Wall insulation works are exempted where works would adversely affect the structure.
  • A purchaser of a non-compliant lease gets a six month exemption period.  If the seller had an exemption for the property this does not transfer. 

Temporary exemptions:

Where a lease is granted:

  • Out of contractual obligation (e.g. an option agreement)
  • Where a former tenant or guarantor obtains a lease through non-payment of rent by the current tenant
  • On a surrender and re-grant
  • Renewals under the 1954 Landlord and Tenant Act