Minimum energy efficiency standards rollout to existing tenancies from April 2020
Since April 2018, new tenancies in England and Wales have had to meet the Government’s minimum energy efficiency standard (MEES). Properties which require an energy performance certificate (EPC) must reach a minimum ‘E’ rating on their EPC assessment, or have a valid exemption registered.
Last year, the Government introduced a ‘cost cap’, requiring landlords to spend up to £3,500 per property to improve them to the minimum level.
From 1 April 2020, this requirement is extending to all existing tenancies. Here’s what you need to know.
What is an EPC?
EPCs are certificates which indicate how energy efficient a property is currently, and could be with improvements. The rating for the EPC is based on an assessment undertaken by an accredited domestic energy assessor. It is based on the ‘fabric’ of the building i.e. how it is constructed and materials, and the ‘services’ e.g. heating, ventilation and lighting. Points are given for each of the energy efficient measures in place – which results in a ‘SAP’ (standard assessment procedure) rating. This is then converted into an ‘EPC band’ or rating – ranging from A for the most efficient to G for the most inefficient.
EPCs are a legal requirement for buildings when constructed, let, or sold. Individual rooms let within an HMO do not require separate EPCs, but if the HMO itself has been let on a single tenancy or sold in the last 10 years, the building will require one.
Who needs to upgrade their properties?
The Government is introducing a minimum band E rating for properties let in England and Wales. This currently applies to all new lets – at the change of tenancy or on renewal – but from April this year will also apply to all existing tenancies, where a valid EPC exists. Landlords must pay up to £3,500 per property to improve any properties currently rated F or G, known as the ‘MEES cost cap’.
What if the cost of improving to an ‘E’ is higher than £3,500?
If the cost of reaching an E rating is higher than £3,500, you will need to register an exemption – either a ‘high cost exemption’ if the cost of installing the cheapest recommended improvement is higher, or the ‘all improvements made exemption’ if improvements up to the value of £3,500 have been made but the property remains rated F or G.
The PRS Exemptions Register is held by the Government. Landlords must upload evidence of the exemption cited when they register. Each exemption is valid for a maximum of five years.
My tenants are refusing access for the works and/or my freeholder landlord won’t give consent. What can I do?
If your tenants are refusing access, or if you own a leasehold property and your freeholder landlord refuses consent, you can register a ‘consent exemption’. Exemptions are usually valid for five years.
However, if the tenant who refused access leaves the property, the exemption will no longer be valid, and you will need to meet the requirements before letting the property again.
My EPC expired last year, and I haven’t re-let the property since. Do I need to make the upgrades?
If the property does not require an EPC and no longer has a valid EPC, it technically does not have an EPC rating at all. This means that you are neither required to meet the minimum standard nor to register an exemption – as no rating exists.
However, you should be aware that if your current tenant moves out and you need to re-let the property, you will need to meet the minimum standard before you can do so. We’d also advise all landlords to consider how to improve the energy efficiency of their properties, both in the interests of their tenants, and as further requirements are likely in the future.
Are there any more regulations on the horizon?
The UK Government has committed to net-zero carbon emissions by 2050. Improving the carbon footprint of housing will be a key objective for them over the coming years, and we expect properties in the private rented sector to be required to meet a minimum C rating by 2030, and an A rating before 2050.
In addition, the Government will be banning gas boilers from new build properties by 2025 – and in time will likely phase gas out from existing properties. Carbon dioxide emissions from the residential sector are currently around 18 percent of the UK total, according to Government statistics, with gas for heating and cooking one of the main sources – so will be a key target.
As these changes come in, new and unfamiliar technologies, such as air source and ground source heat pumps, will become more common, and prices of these will fall. But we’d advise landlords to consider where they can make improvements to their properties as part of their business cycle to get ahead of the game – for example, during void periods.
Where can I find more information?