In a bid to reduce carbon emissions in England and Wales, the Government have introduced regulations to improve energy efficiency ratings across all privately rented homes, to C or above by 2030.
The energy efficiency of a property is determined by its energy performance certificate (the 'EPC'), which establishes a rating based on the performance potential and services of that property. Also included within the EPC is a recommendation report which sets out ways in which a property can be made more efficient, and landlords are required to comply with these measures by statute. An EPC must be provided where a property is being offered for rent (subject to limited exceptions) and will exist for ten years, or until a new certificate is produced.
On 1 April 2018, the Government prohibited new private rentals being offered, where the energy efficiency rating of the property was F or G and on 1 April 2020, this was extended to all private rentals, irrespective of whether old or new. In order to achieve the objective of all private rentals having an EPC rating of C or above by 2030, the Government have proposed a phased trajectory, whereby all new private rentals should have a rating of C or above by 2025 and all private rentals should have a rating of C or above by 2028.
The Cost Cap and Exemptions
The Government have established a cost cap, so that no more that landlords are not required to expend any more than £3,500.00 (including VAT) in improving a property's rating to E or above.
To assist with carrying out improvements, landlords can apply for funding from third parties such as Energy Company Obligation, local authority grants and Green Deal finance. If third party funding only partially covers the costs or cannot be obtained at all, landlords will be required to contribute towards or fund the cost of improvements themselves.
Any energy efficiency improvements made after 1 October 2017 may be included as contributing towards the cost cap and if a rating of E or above cannot be achieved once £3,500.00 has been spent, landlords may register one of the following exemptions:
- 1.The 'all relevant improvements made' exemption, where the cost cap has been reached, but the property still has a rating of E or below;
- 2.The 'high cost' exemption, where the cost of installing even the cheapest improvement measure would be in excess of the cost cap;
- 3.The all insulation exemption, where the only relevant improvements relate to wall insulations and expert written advice has been obtained indicating that these measures would negatively impact the fabric or structure of the building which the property forms part of;
- 4.The third-party consent exemption, where the consent of a third-party is required to carry out the improvements and this cannot be obtained or is subject to conditions which cannot reasonably be complied with;
- 5.The property devaluation exemption, where evidence is provided by a surveyor, showing that improvements would devalue the property by more than 5%; or
- 6.The temporary exemption due to recently becoming a landlord, where, in certain circumstances an individual has recently become the landlord.
Landlords must register the exemption, on a self-certification basis, before it can be relied upon.
Improving the energy efficiency of large, older buildings is likely to be incredibly costly and it is therefore essential that landlords are aware of the funding options available to them and the exemptions that may be registered, especially where they have a portfolio of buy-to-let properties.
Penalties
If local authorities suspect that landlords are either not complying (with the regulations), or have misleadingly registered an exemption, they may serve a compliance notice requesting further information and if a breach is established, impose a fine of up to £5,000.00.
How we can help
The measures brought in by the Government also apply on the sale and building of new homes and the purchase of buy-to-let properties and it is therefore essential that landowners understand and comply with the regulations.
Clapham & Collinge LLP have a dedicated team of experts who are able to advise on the above in greater detail and we encourage landowners, landlords and potential purchasers to get in touch.
Our conveyancing team can advise you on:
- Buy-to-Let
- Freehold and Leasehold Sales/Purchases
- Declarations of Trust
- Lease Extensions/Variations
- Commonhold Property
- Help-to-Buy Scheme, Shared Ownership and Staircasing
- Remortgages
- Transfer of Equity
- New Build Properties
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.
