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Advice for landlords on new EPC Minimum Energy Efficiency Standards

The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 were made on the 26th March 2015. They introduced a change in the law whereby from the 1st April 2018, it will be unlawful to privately let residential and commercial properties with an EPC rating of ‘F’ or ‘G’, unless one of the exemptions detailed below applies.

It is important to note that the Regulations will not apply to properties that are not required to have an EPC or where a property is let for a period of less than six months or for a term of more than 99 years.

What are the Exemptions?

Relevant Energy Efficiency Improvements
Applicable if a landlord can demonstrate that there are no energy efficiency improvements that can be made or where all the available energy efficiency improvements have been undertaken and the property still falls below an EPC rating of ‘E’.

Third Party Consent Refused
Applicable if a tenant, superior Landlord or local authority refuse consent or such consent is subject to conditions that cannot be reasonably complied with.

Reduction in Value
Applicable if an independent surveyor confirms energy efficiency improvements would result in a reduction of more than 5% of the market value of the property.

Temporary Exemption (Landlord Forced into a Letting)
Compliance with the Regulations is postponed for six months where:
a) The landlord is under a contractual obligation to grant a lease.
b) A lease is granted by operation of law.
c) A guarantor has exercised a right to obtain an overriding lease.
d) A lease renewal is granted under Part 2 of the Landlord and Tenant Act 1954.
e) The grant of a lease by order of the Court.

If one of these exemptions applies, it must be registered in the PRS Exemptions Register. Failure to register an exemption will lead to it being ineffective. An exemption must be re-registered every five years.

Timescale for Compliance

Residential Properties
From 1st April 2018, Landlords cannot grant a new tenancy or let the property as a result of an extension or renewal of an existing tenancy.

From 1st April 2020, Landlords cannot continue to let the property.

Commercial Properties
From 1st April 2018, Landlords cannot grant a new tenancy or let the property as a result of an extension or renewal of an existing tenancy.

From 1st April 2023, Landlords cannot continue to let the property.

Penalties for Non-Compliance

Residential Properties

  • Registering false or misleading information in the PRS Exemptions Register – £1,000 penalty and publication.
  • Failure to comply with compliance notice from local authority – £2,000 penalty and publication.
  • Non-compliance for less than three months – £2,000 penalty and publication.
  • Non-compliance for three or more months – £4,000 penalty and publication.

The total penalty imposed must be no more than £5,000.

Commercial Properties

  • Registering false or misleading information in the PRS Exemptions Register – £5,000 penalty and publication.
  • Failure to comply with compliance notice from local authority – £5,000 penalty and publication.
  • Non-compliance for less than three months – 10% of the Rateable Value (minimum of £5,000 and maximum of £10,000) and publication.
  • Non-compliance for three or more months – 20% of the Rateable Value (minimum of £10,000 and of maximum £150,000) and publication.

The Future

The Regulations do not provide for the minimum EPC rating to be reduced at any time in the future however it is likely to be considered to meet the UK’s carbon reduction targets for 2020 and 2050. The Secretary of State is under an obligation to review the operation and effect of the Regulations at intervals of no more than five years i.e. the first review must be conducted by 2020.

Our advice to Landlords

It is imperative you begin an immediate review of your portfolio to identify any properties that fall into the ‘F’ and ‘G’ EPC ratings.

Once the relevant properties have been identified, it must be considered whether any exemptions will be applicable. If not and energy efficiency works are required, you will need to consider whether the terms of the tenancy allow the landlord to enter the property to carry out works. Careful planning is essential to ensure works coincide with regular maintenance or void periods.

The property specialists at Linder Myers can provide you with expert advice and assistance in minimising the potential impact of these Regulations on your portfolio of properties.

If you would like to discuss the changes further, please contact us on 0800 042 0700 or email enquiries@lindermyers.co.uk

Find out more about our Commercial Property department
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