From the 1st April 2018, you will not be able to rent out your property unless it passes an efficiency test. The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. These changes will mean that it will be unlawful to let or lease a residential or commercial property with a poor EPC rating, you could be fined up to £5,000 for non-compliance.
The new energy efficiency requirements will apply to both the domestic and non-domestic properties, meaning that whether a landlord is letting out commercial or residential property, it will be unlawful to do so if the building does not meet the new minimum EPC requirements. Any properties that fall below an E rating on an EPC will be deemed unlawful. The new rating will be based on fuel costs for domestic dwellings and CO2 emissions for commercial property. So long as the minimum E rating is obtained, it is left to the landlord to choose which works need to be carried out. The regulations are being introduced to try and speed up energy-efficiency upgrades in the non-domestic sector. It means landlords with properties which have an EPC rating of F or G, will only be able to let the property after they have carried out improvements to bring it up to the minimum EPC rating band of E.
The EPC must be current and must be no more than 10 years old and as the first EPCs were carried out in 2008; those early EPCs will be due for renewal on new lettings in 2018. After April 2018, if your minimum term ends, but you still have a contract in place, the rules won’t suddenly apply to your tenancy. Even if your last rating was below an E, you will be ok as long as you don’t renew your tenancy. After your minimum term expires, your tenancy can run on as a periodic tenancy on your current EPC rating.
In April 2020, the regulations will apply to all existing lets. At this point, you will need an EPC rating of an E or above to let your property at all. Even if your tenancy is already underway and you have no plans to renew, after April 2020, you will need to have an EPC rating of E or above or you could face being fined.
Exemptions, restrictions on making improvements
Only appropriate, permissible and cost-effective improvements are required under the regulations. Landlords will be eligible for an exemption from reaching the minimum standard where they can provide evidence that one of the following applies:
· They have undertaken those improvements that are cost-effective but remain below an E EPC rating. Cost-effective measures are those improvements that are capable of being installed within the Green Deal's Golden Rule. This ensures that landlords will not face upfront or net costs for the improvement works.
· They are unable to install those improvements that are cost-effective without upfront costs because the funding entails Green Deal Finance, and they or their tenant fail the relevant credit checks.
· The landlord is required by a contractual or legislative obligation to obtain a third party's consent or permission to undertake relevant improvements relating to the minimum standard, and such consent was denied, or was provided with unreasonable conditions.
· The landlord requires consent, and the occupying tenant withholds that consent.
· Measures required to improve the property are evidenced by a suitably qualified independent surveyor, for example from the Royal Institution of Chartered Surveyors (RICS), as expected to cause a capital devaluation of the property of more than 5%. Only those measures that are expected to cause such devaluation would be exempt from installation.
· There will be no requirement to install wall insulation under the regulations where the landlord has obtained a written opinion, from a suitably qualified person or from the independent installer engaged to install the measure, advising that it is not an appropriate improvement due to its potential negative impact on the fabric or structure of the property (or the building of which it is part). (Source https://www.rla.org.uk/landlord/guides/minimum-energy-efficiency-standards.shtml)
It is recommended that landlords have their properties assessed, they can schedule in boosting energy efficiency to coincide with any maintenance and redecoration work at the end of the tenancy, so that the property isn’t let vacant for a long period resulting in loss of income due to the low EPC rating. Should you need to review your EPC, we can assist you with this service and arrange an up to date EPC for your property, you can contact our property management department on 0207 394 1160.