On 1 April 2018 it became unlawful for landlords to grant new or renewal leases/tenancies of any property which has an Energy Performance Certificate (EPC) with less than an “E” rating unless an exemption has been registered or the property is subject to an exception. Failure to comply will result in enforcement action and financial penalties.
From 1 April 2020 the regulations will also apply to existing lettings of residential properties and from 1 April 2023 to existing lettings of commercial properties. Landlords should therefore carry out an assessment of their property portfolio now and obtain up to date EPCs if necessary.
Whilst doing so landlords should establish whether any of their properties:
- Do not require an EPC (such as non-residential agricultural buildings or industrial sites with low energy demand, certain listed buildings, temporary properties, holiday lets, stand alone properties which are smaller than 50 square metres and churches); or
- Do not have a roof or walls; or
- Are awaiting demolition; or
- Are let on short term tenancies for less than 6 months with no right of renewal and where the tenant has not already been in occupation; or
- Are let on long term tenancies of over 99 years
to see whether they are likely to fall within the category of exceptions.
Landlords should also consider whether they are able to register an exemption prior to the grant or renewal of a lease. Exemptions broadly fall into 3 categories:
- Lack of third party consent (where consent from, for example, a tenant, a superior landlord, funder, statutory body or planning authority is required for the landlord to carry out the works and, despite reasonable endeavours, the landlord cannot obtain such consent).
- The landlord is a new landlord (where a landlord has purchased a property subject to an existing lease, where there is a renewal lease under the Landlord and Tenant Act 1954, or where the lease is granted pursuant to a contractual obligation or agreement for lease).
- The works to improve the energy efficiency would cause devaluation or damage to the property (for example where installing wall insulation would damage the fabric of the building, where the property would be devalued by 5% or more or where the landlord can evidence that the capital cost of the relevant improvement measure does not satisfy a 7 year payback test in savings on energy costs, where all improvements have been made or where there are no improvements which can be made.
As some exemptions are only temporary, it may still be necessary for landlords to carry out improvement works. Therefore, if any properties (which are not excepted) are given an “F” or “G” rating, landlords should consider the recommendation reports and any improvements suggested by the energy assessor. An action plan for improvement work should then be put in place to ensure that, by the time any new or renewal leases are granted and any exemptions expire, a new EPC can obtained with at least an “E” rating.
This article is not a definitive statement of the law. It is designed as a free update on the law at the time of publishing. It is not a substitute for legal advice on specific facts and circumstances. BakerLaw LLP and/or the writer accepts no liability or responsibility for reliance on this article and recommends that you seek independent legal advice on your specific circumstances prior to taking any steps.