March 2015 saw the Energy Efficiency Regulations passed which set out minimum energy efficiency standards (MEES) for private rented properties in England and Wales.
This means that from April 2018 it is unlawful for landlords to agree a new tenancy or extend an existing tenancy agreement for properties that have an energy performance certificate (EPC) rating below a certain threshold. Currently this threshold is referred to as Band E, although this could be raised in the future.
Essentially, the regulations present the landlord with an obligation to ensure their properties reach MEES levels before they can be let. They also give tenants in domestic private rented properties the right to make energy efficiency improvements.
With this in mind, landlords should be aware that one part of the regulations has already been phased in. From April 1 2016 an existing tenant can reasonably ask for a relevant energy efficiency improvement to be carried out in a property. This request should be deemed as reasonable, as long as it:
- Can be financed 100% via funding from Central Government, the local authority or other parties, and will be at no cost to the landlord.
- Can be 100% funded by the tenant
- Or can be financed by a combination of the two above
So, while landlords should be aware of the April 2018 requirement, there are two further dates they need to bear in mind. From April 1 2020 all domestic properties, including those with existing tenancy agreements, must have a minimum EPC rating of E. After that, non-domestic properties have until April 2023 to reach this standard. Part 3 of the regulations outlines what landlords can and cannot do, in terms of granting new tenancy agreements and extending existing ones, if they fail to achieve these targets.
Exemptions and penalties
Landlords should note that there are some exemptions to these dates and standards specifically surrounding consent issues, but also if the work carried out to obtain E status would reduce the property’s market value by more than 5%. Landlords should also be aware that while the works carried out to obtain a minimum EPC rating of E should carry no cost to themselves, they do face a potential fine of up to £5,000 if properties do not meet this standard. Furthermore, any existing tenancy agreement in these circumstances would remain valid.
Guidance for landlords
Guidance for landlords has been published by the Department of Energy and Climate Change (DECC), titled the Private Rented Sector Tenants’ Energy Efficiency Improvements Provisions. This outlines what landlords should consider when they receive an improvement request from a tenant. Landlords do face some options, and the guidance explains that they can reasonably refuse to consent to the request under certain circumstances, they can also seek further advice and third party consent, and a landlord is also entitled to make a counter proposal to address the energy efficiency improvement via other means.