Landlords of non-domestic properties with EPC ratings of below E now have less than two weeks to improve the EPC rating or register an exemption. Failure to take either route, could result in a fine of up to £150,000 plus ‘naming and shaming’.
From 1 April 2023, it will be unlawful for a landlord to ‘continue to let’ a sub-standard property, unless an exemption applies and has been validly registered on the PRS Exemptions Register.
Currently a ‘sub-standard property’ is a property with an EPC rating of below E, but that is set to change, with the minimum rating likely to be raised to C in 2027 and B in 2030. See our legal insight for more information.
What should I do if I am the landlord of a property with an EPC rating of below E?
You will either need to carry out energy improvement works, to bring the EPC rating up to at least an E rating, or register an exemption.
Is there any limit to the amount I need to spend on energy improvement works?
You must carry out works which come within the definition of ‘relevant energy efficiency improvement’. That means that:
- they are listed in the Schedule to the Green Deal (Qualifying Energy Improvements) Order 2012 or Table 6 of the Building Regulations Approved Document L28; and
- have been identified as a recommended improvement for that property in a green deal report, a recommendation report, or a report prepared by a surveyor.
To be ‘relevant energy efficiency improvements’ they must also satisfy the 7 year payback test.
If you carry out all relevant energy efficiency improvements, and the property is still rated below E, you can continue to let it provided that you have registered an exemption on the PRS Exemptions Register.
Does the legislation give me a right to enter a tenanted property to carry out works?
No, the legislation does not give an automatic right of entry to landlords to carry out energy improvement works. Whether or not you have such a right will depend on the drafting of the lease. Where there is no such right, you will need to get the tenant’s consent. If the tenant will not give consent, you may be able to register a ‘consent exemption’.
What happens if I buy a property with an EPC rating of below E, which is subject to tenancies?
From 1 April 2023, you will be able to register a temporary exemption. This exemption lasts for six months, and is designed to enable the purchaser to get the property up to the required standard, or register a longer-term exemption.
What other exemptions are available?
- Devaluation exemption: If a report sets out that the installation of specific energy efficiency measures would reduce the market value of the property, or the building of which it forms part, by more than 5%, the landlord could benefit from this exemption.
- In addition to the temporary exemption for purchasers of tenanted sub-standard properties, there are other circumstances in which a temporary exemption could be relied on - for example, on a lease renewal.
How long do the exemptions last?
The temporary exemptions last for six months. Other exemptions will generally last for five years. However:
- If you have relied on a consent exemption on the basis that a tenant won’t grant access to carry out works, this exemption falls away when that tenant leaves the property.
- Exemptions are not transferable, so if you buy a property against which an exemption has been registered, you cannot take the benefit of it. You would have to register your own exemption.
If I get the property up to an E rating, will I have any further obligations around energy improvement works?
It is likely that standards will rise. We are awaiting a response to the 2021 consultation, which proposed raising the minimum standard for non-domestic properties to C in 2027, followed by B in 2030. It is also possible that in-use energy ratings will become mandatory for some properties.