From this date landlords will not be permitted to grant a lease of a property with an EPC rating of F or G unless they have made all possible cost-effective energy efficiency improvements or one of the exemptions applies.
Under the current regulations, landlords of residential properties with an EPC rating of F or G are required to upgrade the energy efficiency of their properties only if this can be done at no cost to the landlord by way of a Green Deal finance plan, the Energy Company Obligation (ECO) or a local authority grant. However, the Green Deal finance plan was withdrawn in 2015 as a result of the Treasury’s refusal to continue to fund it and the Energy Company Obligation is currently not scheduled to continue beyond 2022.
The government has now issued a consultation which suggests that landlords of residential properties with an EPC rating of F or G should in fact contribute towards the cost of improving their energy efficiency, but with a cap on that contribution of £2,500 per property.
The key proposed amendment is the removal of the ‘no cost to the landlord’ principle. As mentioned above, a cap of £2,500 per property is being proposed. A landlord will need to ascertain what works are required (as stated in the EPC recommendations report) and investigate whether no cost funding is available. If it is, this should be used. If it is not, then the landlord must carry out sufficient works to reach an E rating, using his own funds, up to a maximum of £2,500 per property (inclusive of the amount of any third party funding that is available). A landlord who spends the full £2,500 on a property but is unable to bring the rating up to E would be entitled to register an exemption, which would last for five years.
The Government estimates that a cap of £2,500 per property should enable approximately 30% of sub-standard properties to be improved to E, which equates to approximately 85,000 properties. The government estimates that the average cost of works to bring a property up to an E rating is £865. If a cap of £5,000 per property were chosen, it is estimated that 42% of sub-standard properties would be improved to E, equating to 120,000 properties. On the other hand, if a cap of £1,000 was chosen, this would mean that only 14% of properties would be improved, amounting to 40,000 properties. A lengthy and complex impact assessment accompanies the consultation document.
The proposal is that these changes should take effect on 1 April 2019. On that date, any existing exemptions registered by landlords based on the ‘no cost to the landlord’ principle would cease to be valid. In readiness for that date, landlords would at that point need to reassess their properties and potentially spend their own money improving them.
The consultation closes on 13 March 2018. Residential landlords are encouraged to respond.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.