On the horizon: more costs for residential landlords

Global Publication November 2018

Since 1st April 2018, a commercial or domestic property that does not achieve an Energy Efficiency Certificate (EPC) rating of E or higher is a “substandard property”. A sub-standard property must not be let until the landlord carries out “relevant” energy efficiency improvements to bring it to the required standard.

There are some exemptions (see our July Focus), one being that improvements to domestic property are only required if they are at “no cost” to the landlord, for example because local authority grants are available.

The government has decided that this exemption has resulted in the regime having “insufficient bite”. It announced on 5th November 2018 that the current regulations (The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015) will be amended to:

  • Remove the current “no cost to the landlord” exemption and curtail those currently enjoyed so that they end in April 2020.
  • Replace the “no cost” rule with a landlord financial contribution capped at £3500 (inclusive of VAT) per property, with any available third party funding and any investment in energy efficiency made since October 2017 to be counted within the cap.
  • Establish a new “high cost” exemption where a substandard property cannot be improved to E for £3500 or less, with the landlord required to produce proof in the form of three installer quotes when registering the exemption in the PRS exemptions register.
  • Remove the exemption currently available where a tenant has withheld consent to a Green Deal financial plan.

Once in force, the amended regulations will apply on the grant of a new tenancy to both new and existing tenants. From 2020, they will apply to all privately rented domestic property.

Enforcement is in the hands of the local authority and its powers include the issue of fines (capped at £5,000) and the right to “name and shame”.

The changes are expected to come into force during 2019 “subject to parliamentary time” and, it is estimated, will affect about 200,000 landlords.

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