Domestic Rental Sector

Minimum level of energy efficiency changes to the regime

The Government have published their response to the consultation on proposals to amend The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. These Regulations prohibit the letting of domestic property which has an EPC rating in Band F or G after 1st April 2018, or the continued letting of such property after 1st April 2020.

Landlords may apply for an exemption to allow the letting of a Band F or G property in a number of situations, including where the improvements cannot be funded by a third party, due to the regulations being predicated on the availability of Green Deal funding. Under the current Regulations, Landlords were not expected to fund energy efficiency improvements themselves.

The Government recognised that this position was unsustainable, because with the collapse of the Green Deal there was no incentive for Landlords to carry out any works. It was therefore proposed, in a consultation which opened in December 2017, to introduce a Landlord’s cap so that Landlords would have to contribute up to £2,500 per property to make energy efficiency improvements.

The Government response to that consultation has now been published and the key change is that the cap amount has been increased to £3,500 per property. In summary the following changes are to be introduced:
• Removal of the current ‘no cost to the landlord’ provision, and curtail existing ‘no cost’ exemptions so that they will end on a planned date of April 2020.
• Make Landlords liable for a financial contribution capped at £3,500, towards the cost of energy efficiency improvements required to meet the MEES Regulations
• Included within the cap are:
o Any investment in energy efficiency made since October 2017
o Any available third-party funding, including Green Deal finance and local authority grant funding
• Establish the availability of a new ‘high cost’ exemption, where a substandard property cannot be improved to E for £3,500 or less. In cases where the Landlord is registering such a ‘high cost’ exemption, submission of three installer quotes will be required
• Remove the consent exemption where a tenant has withheld consent to a Green Deal finance plan
• Upon enactment, the amended Regulations will apply upon the granting of:
o a new tenancy to a new tenant, and
o a new tenancy to an existing tenant.
• From 2020, the amended regulations will apply to all privately rented property in the scope of the Regulations, in line with the existing regulatory ‘backstop’ date.

The Government intends to lay the amending Regulations before Parliament as soon as possible, with the expectation that the amendments will come into effect during 2019.

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