The Scottish Government’s regulations on minimum energy efficiency standards in Scotland’s private rented sector (PRS) are due to come into force on 1 April 2020. The Energy Efficiency (Domestic Private Rented Property) (Scotland) Regulations 2020 (“the Regulations”) were finally published at the end of January, following draft regulations and a consultation in 2019.

We have written previously on the draft regulations so will concentrate here on a few of the significant changes in the Regulations as finalised.

Restrictions on Letting Delayed

Landlord’s concerns around the delay in having sight of the Regulations have been taken on board; the restrictions on letting a property which doesn’t meet the standard will not now come into effect until 1 October 2020. The letting restrictions are summarised in the table below.

Cost Cap Exemption re-structured

While the headline figures remain the same, the details of the cost-cap exemption have been greatly fleshed out in the Regulations and the structuring altered, with the end result looking to be more flexible and incentivising landlords to undertake works.

In the previous draft, the provision allowing registration of an exemption was that the cost of making improvements would exceed £5,000 in period 1 April 2020 – 31 March 2022 (i.e. to try to reach Band E), and then a further £5,000 spend was required after 31 March 2022.

In the Regulations, the position remains that there is a limit of £5,000 up to 31 March 2022, but after 31 March 2022, the limit goes up to £10,000. However, in both cases, the works taken account of in calculating the costs are any works from 1 April 2020 so the £10,000 is a cumulative spend.

An example illustrates how this may provide a greater incentive to do works:

  • At 1 December 2020, the landlord has undertaken £3,500 of improvements which leaves the property still within Band F. The next improvement would take the property into Band E but costs £3,000, taking the landlord beyond the first cost cap.
  • The landlord could choose at that stage to register an exemption, which would mean the property could be let out, even though it is only a Band F. Under the previous draft regulations, that is almost certainly what the landlord would have done as a further £5,000 spend was required after 31 March 2022 anyway. Why spend £1,000 that isn’t taken account of in the next limit calculation?
  • In terms of the Regulations, if the landlord chose to do those additional works, exceeding the initial cost cap, the full £6,000 of previous works can be taken into account in getting to the £10,000 limit from 1 April 2022 – meaning only a further £4,000 to be spent by 31 March 2025.

Penalties

The maximum financial penalty remains £5,000 but the various fines are now specified sums (rather than “not exceeding” figures), as follows:

Offence

Fine

Letting of sub-standard property

£500 if breach for less than 6 months, £2,500 if in breach for 6 months or more

Submission of false or misleading information in connection with a compliance notice

£500

Failure to comply with compliance notice

£500