Landlords and their obligations | Commercial property law

Do landlords now have an obligation to make their rented properties energy efficient?

Yes, but if you’re a landlord you’ll be glad to hear this is only to a certain degree.

The snappily titled Energy Efficiency (Private Rented Property) (England and Wales) Regulations were introduced in 2015, with the aim of addressing the least energy efficient properties in the UK. The regulations established band E as the minimum acceptable Energy Performance Certificate (“EPC”) rating for both domestic and non-domestic private rented property. All this has essentially meant that, since 1 April 2018 landlords have been unable to rent, or even renew an existing tenancy, if the property has an EPC rating of F or G, until works had been carried out to the property to improve its rating to E or above.

15 March 2019 however, brought more change, including:-

• A self-funding element for domestic landlords, scrapping the “no cost to the landlord” principle. If landlords are unable to access third-party funding to improve a property with an EPC rating of F or G, they may have to contribute up to £3,500 (including value added tax) per property.
• A longstop for those relying on existing “no cost to the landlord” exemptions so from 1 April 2020 all such exemptions will be invalid irrespective of when they were registered.
• A new “high cost” exemption; essentially the ban on letting properties which have an EPC rating of F or G will not apply if the cost of the cheapest recommended improvement would exceed £3,500 (including value added tax). Landlords should note that this exemption only applies to domestic property and in order to apply the landlord must submit three installer quotes.
• Removal of the “consent” exemption; the “consent” exemption acknowledged that certain improvements may require consent from third parties before they could be installed in domestic and non-domestic property.
• The automatic termination of any existing consent exemption upon the termination of the relevant tenancy, irrespective of when the exemption was registered.

Although there are many legal requirements involved with energy efficiency, it’s not all bad news for landlords. Recent data indicates that improving the energy efficiency of property can actually increases the market value; so landlords may benefit from a capital value boost.

This note contains points for consideration, but if you have any questions about the rules surrounding energy efficiency, or would simply like further information about the process please contact Nicola Pearce, a solicitor in our Commercial Property Team at npearce@thursfields.co.uk or by phone on 0121 227 3876.