It’s crucial that landlords understand the details and implications behind the new minimum energy efficiency standards
Unwanted carbon emissions and higher-than-necessary energy bills are just two negative consequences which can result from a property baring a low energy efficiency performance, but the requirement that privately rented properties must have a minimum rating of Eon an Energy Performance Certificate is now the law as of 1st April this year.
With very few exceptions, it is illegal to let a home that has not achieved this and landlords could face prosecution. Therefore, taking advantage of voids and lease breaks to upgrade a property’s energy performance is a wise move.
The new minimum energy efficiency standards (MEES) regulations for England and Wales applies to new lets and renewals of tenancies, and, for all existing tenancies, the regulations will take force from 1st April 2020.
Research collated last year revealed that approximately two-thirds of buy-to-let landlords lacked awareness of the new MEES. Almost half admitted to being only ‘vaguely aware’ of the new rules, and around 27% of them do not know the EPC rating of their own property. New data gathered in February this year suggests there could still be thousands of property owners with commercial buildings that could breach the new guidelines but don’t know it.
What are the penalties?
If the property continues to be rented out for a period of fewer than three months whilst in breach of the MEES regulations, the penalty will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000. After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.
Are there any exemptions?
Exceptions can be made to the MEES. However they are limited and consist of only three. The FIRST is where an independent assessor determines that all relevant energy efficiency improvements have been made to the property, or that improvements that could be made but have not been made would not pay for themselves through energy savings within seven years. The SECOND is through devaluation, whereby an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%. The THIRD and final exception is relating to third party consent, whereby the consent from persons such as a tenant, a superior landlord or planning authorities has been refused or has been given with conditions with which the landlord cannot reasonably comply.
It’s important to note that any exemptions must be registered on the central government PRS Exemptions Register, which is live from 1st April, and to also remember that exemptions are only valid for five years and cannot be transferred to a new landlord.
What you, as a landlord, can do to ensure you meet the required standards
Landlords looking to sell should be prepared for buyers to run a re-simulation of a building’s EPC using up-to-date software. The prospective buyer could then use this information to attempt to reduce the asking price. When there is a change of tenant, however, it is sometimes required that there is extensive refurbishment of a building. This can trigger the need for a new EPC assessment, and landlords should therefore bear in mind that without including energy efficiency upgrades within this refurbishment, they could risk being downgraded to a lower rating, and potentially even losing their ability to rent the property altogether.
Images Source: Howes Percival.
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