In July 2014 the Department of Energy and Climate Change (DECC) released a consultation on proposed regulations relating to minimum energy efficiency standards for properties that are to be leased. The deadline for responses was 2 September 2014, with the regulations due to be in force on the 1st April 2018. Whether or not the consultation will have affected the draft proposals remains to be seen.
The current consultation proposes that the regulations will affect properties with a rating of F or G and require a landlord to do works to increase the energy efficiency of a building before it is allowed to let the property.
Undertaking works that raise the level to an E would mean the landlord complies with the regulations. If this is not possible then the works must at least satisfy the “golden rule” in the government’s Green Deal, namely that the reduction in energy bills outweighs the costs of repaying any Green Deal loan in the first year after the works.
This will initially apply to all new lettings after the initial start date of 1 April 2018, but will affect leases granted before then from April 2023.
Failure to comply without a permitted reason may result in financial penalties and a requirement to carry out the physical changes.
Not all lettings will be caught, at present the main exceptions will be:
- Lets of six months or less
- Long lets of over 99 years
- Cases where a landlord cannot obtain consent from a sitting tenant to do the required works
- Lettings which do not require an EPC to be produced
The consultation debates whether or not lease renewals, which would fall within the latter category, should be exempt. The consultation asks whether this exemption should be mirrored in the new regulations or whether doing so would risk losing a golden opportunity for a landlord to talk to a tenant about facilitating the carrying out of energy efficiency improvement measures.
All landlords, tenants and property professionals need to be aware of any properties that have an EPC rating of less than E so that they can consider how the forthcoming regulations will affect them. It is also likely that in the future the government may raise the level so that the rules apply to more than F and G properties, and so energy efficiency should start to be a real consideration for all parties.