The Government’s Clean Growth Strategy sets out its low-carbon policies and plans aimed at accelerating the pace of 'clean growth', ie delivering increased economic growth alongside decreased emissions. A summary of the key points of interest to the real estate sector can be found here.
Since its publication in October 2017, the Government has progressed a number of the initiatives in the strategy. Of particular note to the real estate sector will be the current consultation to amend the domestic Minimum Level of Energy Efficiency Regulations (MEES) and changes to its guidance on energy performance certificates (EPCs).
Consultation to amend domestic MEES
The Government has launched a consultation seeking views on a proposal to amend the domestic MEES to remove the ‘no cost to the landlord’ principle and instead to introduce a ‘capped landlord financial contribution element’.
This proposal is designed (it says) to future-proof the regulations and make them as effective as possible, while protecting landlords against excessive cost burdens. With a cost-cap, domestic landlords would only need to invest in improvements to an EPC F or G rated property up to the value of that cap. The Government's preferred cap level is £2,500 per property. A range of alternative cap options ranging from £1,000 to £5,000 are set out in the consultation and the associated consultation impact assessment.
Effectively, therefore, even if the landlord is unable to obtain funds from the Green Deal (as will almost certainly be the case), it will have to put in up to £2,500 of its own money in an attempt to bring the property up to an E rating. If £2,500 isn't enough to get to E, it will have to do what it can with that money.
The Government’s analysis indicates that a cap of £2,500 will enable approximately 30% of F and G rated domestic properties in England and Wales to be improved to an E rating, equating to around 85,000 properties. The remaining 70% (around 195,000 properties) could be expected to take some action within the cost cap while not achieving a band E rating. By way of comparison, the same analysis indicates that a cap of £5,000 would allow 42% of the F and G rated properties to reach band E (an additional 35,000 homes).
The last date for responses to the consultation is 13 March 2018. The proposal is that the new arrangements will apply from 1 April 2019.
Changes to guidance on EPCs
The Government has recently published new guidance on both domestic and non-domestic EPCs. This guidance is intended to help those dealing with domestic and non-domestic property to understand how the relevant EPC regulations work and where the responsibilities lie. The main change to the guidance clarifies whether listed buildings and buildings within a conservation area require an EPC to be provided on sale or letting.
The Energy Performance of Buildings (England and Wales) Regulations 2012 (2012/3118) provide that ‘buildings protected as part of a designated environment or because of their special architectural or historical merit’ are exempt from the requirements to have an EPC if compliance with MEES would ‘unacceptably alter their character or appearance’.
It was previously unclear whether non-listed buildings located within a conservation area would fall within this exemption, but the new guidance clarifies that both listed buildings and those within a conservation area will constitute ‘buildings protected as part of a designated environment or because of their special architectural or historical merit’.
The notion of an unacceptable alteration to character or appearance is also expanded on in the new guidance. It notes that many common energy improvement works such as double glazing, new doors and windows, external wall insulation and external boiler flues may well result in unacceptable alterations in historic buildings.
The guidance notes that building owners will need to take a view as to whether this will be the case for their buildings. If there is any doubt as to whether works would unacceptably alter the character or appearance of a building, it recommends that building owners seek the advice of their local authority’s conservation officer.