EPCs 10 years on – time to reassess their impact?

It’s a decade since residential properties in the UK were first required to have a ten year Energy Performance Certificate (EPC) before they could be sold or let. As the ten year anniversary approaches, the time has come for the early starters to be reassessed.

Originally part of the Home Information Pack (HIP), loved by a few and loathed by many - but which would have been useful if implemented as originally intended, the EPC survived when the HIP requirement was abandoned in 2010.

At first regarded as a bureaucratic irritation rather than a necessity, the EPC gained more traction recently when the introduction of Minimum Energy Efficiency Standards (MEES) meant that from April 2018 it will be difficult, but not impossible as some suggest, to let a property with an Energy Efficiency Standard below Band E on its EPC. There are exemptions that can be registered, but these are subject to re-application every five years, and it is by no means certain that this will continue ad infinitum. Indeed, it’s expected that the rules will become tougher and eventually exclude Band E properties.

With that in mind, it could be beneficial to review the EPC for your property even if you are not yet required to replace the original purchased 10 years ago. In fact, some landlords are relying on an EPC that exists from when they purchased the property, and therefore was provided by the vendor rather than themselves.

Where a property is Band F or G, but also for those with a low score in Band E, having a new EPC assessment could make the difference between 10 years of worry-free letting and the stress of not knowing whether an exemption granted in time for April 2018 will be renewed in 2023.

The energy assessor who provides the EPC will check for items such as double glazing, boiler efficiency, radiators, and insulation for the hot water tank, walls, and loft. The results are fed into a software program that produces a figure for the EPC, which in turn determines the banding in some instances. The assessor can override the program if there’s visual or written evidence that standards are higher than the software assumes.

Where you are borrowing to fund the purchase of a lettings property, your lender may want confirmation of its energy efficiency standards, especially where the current banding could make it borderline in the future and therefore bring a possible diminution in its asset value. Therefore, taking care of what was once regarded as a merely administrative necessity could pay dividends.

Certain classes of building are exempt from the need for an EPC. As far as residential landlords are concerned, the principal category concerns those that are officially listed as of historic interest.

From April this year, tenants have had the right to ask their landlords to approve their installation of energy efficiency measures. Originally this would have fallen under the Green Deal - a scheme that already had drawbacks before its funding was withdrawn because of low take-up.

Improvements were supposed to be funded through energy bills applicable to a property, provided the benefits of the improvement outweighed the cost of making them.

But it’s much better to make these improvements independently, as part of an investment in your lettings property, rather than using a scheme that allows tenants to take charge, as this may ultimately restrict which energy company you can use in the future, as not all energy providers are involved. While this may seem insignificant, consumers are growing more energy aware and may resent having their opportunities to switch curtailed.

My recommendation is that where tenants ask to carry out an energy survey, you allow it to go ahead, but then consider whether or not it’s to your advantage to implement the improvements yourself so you retain control. It may also be that the work can be completed at lower cost than the tenant’s chosen contractor offers.

Lisa Simon, 

Partner Head of Residential Lettings

T: 020 7518 3234 

E: lisa.simon@carterjonas.co.uk

Don’t fall foul of new residential tenancy rules

Don’t fall foul of new residential tenancy rules is the message coming loud and clear from the Central Association of Agricultural Valuers’ spokesperson, Kate Russell.

With rental income from cottages and converted farm buildings becoming an increasingly important financial lifeline for many farmers, they need to take heed of these latest developments.

In the main, the new rules are being put in place to protect tenants from unfair treatment but landlords who may have behaved perfectly reasonably can be caught out by the new legislation.

Probably the most important new rule in 2015 was the introduction of prescribed legal requirements for Section 21 notices, which have to be served to terminate an Assured Shorthold Tenancy.

For tenancies beginning after October 1, 2015, landlords may not serve a Section 21 notice to terminate a tenancy unless the tenant has been provided with:

•    A free and valid Energy Performance Certificate (EPC)
•    A copy of the gas safety certificate for the property where appropriate and
•    A copy of the government’s guidance note: How to Rent: A Checklist for Renting in England

Other new rules include Right to Rent checks.  Since February 1, 2016, landlords must check that their tenants (and any adult living with them) have the legal right to rent in the UK. Penalties for failure to conduct such checks can result in fines of up to £3,000.

In order to comply, landlords or their agent must check original documents such as a passport or birth certificate in the presence of the document holder and then keep copies of them for a year after the tenancy ends.

In addition, all landlords must ensure there is a smoke alarm on each storey and a carbon monoxide alarm in every room with a solid fuel burning appliance, including wood burning stoves, open fires and Agas.  Failure to comply with these rules, which cover both residential and agricultural tenancies could ultimately lead to a fine of £5,000.

Then there are restrictions on landlords serving termination notices in response to tenants who may have complained about the condition of the property and the Landlord has failed to respond adequately.

And from April 1, 2016, a landlord cannot unreasonably refuse a tenant’s demand for energy efficiency improvements if they can be carried out without cost to the landlord.  While from April 1, 2018, a domestic private rented property cannot be let on a new tenancy if it has an EPC of F or G. This will also apply to existing tenancies from April 1, 2020.

However, where a property does not comply, landlords who have done everything they can to improve its energy efficiency (at no cost to themselves) can apply for a five-year exemption every five years.

So the message is that regulations concerning renting out properties are becoming more and more stringent and landlords either need to get clued up on the new legislation themselves or employ professional help to ensure their rental properties do not become an unexpected financial burden.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Private Rented Sector Energy Efficiency Regulations

Fears that many rural properties may be adversely affected by the “Private Rented Sector Energy Efficiency Regulations” appear to be misplaced.

When the Department of Energy and Climate Change (DECC) published the regulations, this led to immediate reports that properties with an EPC rating in Bands F and G would become un-lettable from 1st April 2018.

The basic premise of the regulations is that from 1st April 2016 domestic tenants will have the right to request consent to make energy efficiency improvements under the regulations that have been laid before Parliament. Landlords would need to provide a response to the tenant’s request within one month.

The minimum energy efficiency standard applied will be set at E and from 1st April 2018, the regulations will apply upon the granting of a new tenancy to a new tenant or new tenancy to an existing tenant. The regulations will then be extended to apply to all privately rented property from 1st April 2020. In effect this appears to mean that any property that cannot achieve an EPC rating of A-E could no longer be let.

The concern for farms and rural estates was that very many farm and estate cottages would struggle to achieve and EPC rating of A-E. This is because they are often old and built using traditional construction methods, which may make them attractive country cottages but it is often difficult to bring them up to modern energy efficiency standards without very significant expenditure.

If these properties were to become un-lettable this would put real pressure of the availability of housing in the countryside which in turn would have serious implications for rural communities where affordable housing is already a serious problem.

But, crucially, there is the ability for landlords to seek exemptions. Essentially, where a landlord considers an exemption applies allowing them to let their property below the minimum energy efficiency standard the landlord will need to provide such evidence to a centralised register, the “PRS Exemption Register.” Landlords may be required to submit relevant evidence and details of their exemption to the Register. The Government may use this information to assist local authorities in targeting their enforcement activity.

Thus it appears that if the cost of upgrading a property is greater than the financial benefit to be gained from the upgrade the landlord may be able to apply for an exemption. The regulations will detail specific circumstances under which a landlord can refuse consent for the tenant to implement energy efficiency measures. Landlords can also claim exemption where a tenant refuses their proposals to improve efficiency.

There will be an appeals tribunal system. The regulations will include a number of safeguards to ensure that only appropriate, permissible and cost effective improvements are required under the regulations.

In time it seems these regulations will bite as energy prices rise in the long term, but in the short term it appears band F and G properties which cannot be cost effectively upgraded to band E or above will not be relegated to the scrap heap immediately although we will wait to see if the rental value of such properties will be impacted.  

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk