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4 August 2015

Energy efficiency regulations within the private rented sector

Looming on the horizon for a number of landlords within the private rental sector are the energy efficiency plans brought to the fore by the Energy Efficiency (Private Rented Property) Regulations 2015, which come into force fully on 1 April 2018.

From this point forward, the owners of commercial and domestic properties will need to ensure that their premises meet a standard E rating in relation to energy efficiency.

The idea of the regulations is that they are staggered, with a timeline running essentially from 2016*  to 2023, most likely with the purpose of taking into account the large numbers of properties which will be affected by the change and the potential cost to the individual owners, not to mention the management of various funding schemes.

So what are the main aims of these regulations?

  • To give tenants the ability to exercise some control over their properties.  From 2016, tenants in private residential properties will, under the regulations, be allowed to request in writing that their landlords make their properties more energy efficient.  A landlord who receives such a request has a month to reply – either accepting, refusing or counter-proposing implementations.  It is worth noting, however, that there are circumstances in which a landlord can reasonably refuse;
  • To ensure that there is compliance with the duty under the Energy Act 2011;
  • To have more control of energy bills;
  • To tackle fuel poverty.

Such is the importance placed upon the issue by all parties across the political spectrum that it should come as no surprise that the sanctions for failing to comply with the regulations are quite stringent.

A breach of the regulations by landlords of commercial properties could attract a fine of up to £50,000 for a breach of less than three months; up to a maximum of £150,000 for breaches in excess of three months.

In relation to landlords of residential properties, the maximum fine which can be imposed is £5,000.  A breach of the regulations could also lead to a landlord being banned from letting the property.  A breach, however, from the tenant’s point of view will not affect a “valid” tenancy and so terms and conditions, such as the payment of rent, will still apply unabated.

Landlords should also be aware that it is not always a case of maintaining silence with the hope that their compliance failure is going to go unnoticed.  Particularly in relation to commercial properties, it is within the remit of a local authority to publish details of those who breach the regulations.

So what is the timeline?

  • 2016 – Date from which residential tenants can request in writing that their landlords implement energy efficiency changes to the premises.  Subject to certain exemptions, a landlord cannot unreasonably refuse consent where there is Green Deal Finance or subsidies available to fund the improvements;
  • 2018 – Both residential and commercial landlords will need to ensure that their properties have at least an E rated EPC (Energy Performance Certificate), or have taken steps to install such improvements, which could be funded by the above finance or subsidy, before granting a tenancy to a new or existing tenant;
  • 2020 – Date from which all privately rented properties will required at least an E rated EPC, regardless of when the tenancy began;
  • 2023 – Date from which all commercial/non-domestic properties will require the E rated EPC, regardless of when the lease commenced.

There are arguably benefits to both sides of the energy debate.  For tenants, it can mean a reduction in their bills and warmer and more comfortable homes.  For the landlord, it indicates a standard of compliance and investment in their properties, which will undoubtedly be attractive to potential tenants.

Inevitably, however, as with most things, there is a cost attached to compliance.  The hope is that a portion of this will be absorbed by the available funding and so it is advisable for landlords to make enquiries regarding eligibility as early as possible and not leave enquiries until the eleventh hour.

With the ever increasing size of the private rented sector comes increased regulation and this must be accepted by those who own, reside or transact within it.  There appear to be no indicators as to precisely who compliance will be monitored by or how, however, one suspects that monitoring will fall across the remit of tenants; letting agents; local authorities; and the landlords themselves.

Compliance for landlords is likely to be “voluntary”; the majority will comply with the regulations, having weighed the financial and reputational risk of not doing so.  There will undoubtedly be those who will actively look to evade or circumvent the regulations, either completely or for as long as possible.

It is in the nature of the beast that there will always be opposing forces in any given situation, however, the hope is that with these regulations, there will be an incentive for all parties, both landlord and tenant, to share the benefits of an energy revolution.

*Date of the regulations which deal specifically with request for improvements.

Contact the team today

If you would like to speak to a member of the Conveyancing team regarding letting your property, please email realestate@steeleslaw.co.uk.

Unfortunately, disputes between landlord and tenant aren’t uncommon. Fortunately, our dispute resolution team has seen it all before and can always step in, if you do face an issue. Contact the team today, emailing disputes@steeleslaw.co.uk or by calling 01603 598000.

*The information provided in this article is designed to provide useful information on the subject, not to provide specific legal advice.

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