Minimum Energy Efficiency Standards and EPC ratings

In 2015, the government introduced more stringent regulations in relation to the energy efficiency of properties.

Under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (SI 2015/962), landlords have been prohibited from letting out domestic properties deemed as “sub-standard” on new tenancies from 1 April 2018. Under these rules, landlords will no longer be able to continue to let “sub-standard” properties from 1 April 2020, and this deadline has arrived.

A property is deemed to be “sub-standard” if it does not have a valid EPC rating of at least E.

This is relevant if landlords let out a property on an assured tenancy, a regulated (including a protected and a statutory) tenancy and an assured, protected or statutory agricultural occupancy or tenancy. Other tenancies may also qualify (including where the rent is low or where the landlord has no choice over granting).

A select few types of tenancies are exempt, including secure tenancies under the Housing Act 1985, as well as reversionary and overriding leases, however, depending on their nature, they could become assured tenancies at various stages. Low cost housing provided by social housing providers, and shared ownership agreements are also exempt.

What if my property is not up to standard?

Unless your property is in one of the exempted categories, or you are an exempted category of landlord (as noted above), it is likely that you will be unable to continue to let your property out legally.

You will have to ensure that one of the following positions applies:

1. Improvements to the property have been made sufficient for it to meet the criteria for EPC E as a minimum
2. All the “relevant energy efficiency improvements” (works noted in the regulations) have been done to the property, even if these do not raise it to EPC E standard, and the relevant information has been registered on the PRS Exemptions Register
3. There are no “relevant energy efficiency improvements” which can be made to the property, and the relevant information has been registered on the PRS Exemptions Register

In the case of point 1, it is recommended that the updated EPC is commissioned. In the case of points 2 and 3, landlords have five years where they can continue to lease or grant new leases.

What if I am in breach?

The regulations are enforced by local authorities. Local authorities have a range of powers to ensure compliance, including serving a landlord a compliance notice if they suspect a breach, and they may then issue a financial penalty. A landlord can be fined up to £5,000 per property.

How do I pay for the improvements?

Generally, there are three funding options:

1. Self-funding or borrowing - This could include trying to recoup some of the cost through a service charge increase, if the lease permits. However, it could be tricky to get a tenant to agree if there is no such provision in the lease, or if they have not signed up to the lease yet.
2. Third party funding - Limited Green Deal and ECO funding may be available.
3. A combination of the above

Landlords must be compliant in relation to properties with existing tenancies from 1 April 2020, or will face significant penalties, so it is imperative that they ensure this.

If you have any queries regarding your property portfolio and are concerned about the MMES provisions, please do get in touch with the Residential Property Team.