01 Apr 2018

Minimum Energy Efficiency Standards - Recent Law Update

From 1st April 2018, landlords of non-domestic private rented properties (including public sector landlords) may not grant a tenancy to new or existing tenants if their property has an EPC rating of band F or G (shown on a valid Energy Performance Certificate for the property) and from 1st April 2023, landlords must not continue letting a non-domestic property which is already let if that property has an EPC rating of band F or G.

Simply put, landlords have the option to make the relevant alterations to their property to achieve a minimum E rating or apply for an exemption on the PRS Exemptions Register.

The PRS Exemptions Register will be made available to landlords so that they can temporarily register their property, if they can provide valid evidence for a specific list of exemptions.

The Exemptions include:

High cost exemption – costs of purchasing and installing improvements exceed a simple seven-year payback

Impact on value exemption – installing the measures will decrease the capital value of the property by more than 5%

Unsuitable measures exemption – measures that would potentially have a negative impact on the fabric or structure of the property

Consent exemption – landlords maybe unable to obtain third party consent to carry out the works e.g. from a superior landlord, planning departments, tenants, financial institutions with an interest in the property etc

Exemptions on grounds of recently becoming a landlord – if a person becomes a landlord under a set of prescribed circumstances, they will be exempt for a maximum of six months

Exemptions must be lodged on the PRS Exemptions Register and must include related evidence. Exemptions cannot be passed over to a new owner and a new exemption will therefore need to be applied for or the new owner will need to improve the property to the relevant standards. 

With regards to the high cost exemption, a seven-year pay back test can be applied which uses a straightforward formula to calculate the cost of the measures against the savings. This must be carried out using the approved methodology and with relevant energy prices. As qualified assessors, we can carry out these calculations and would be happy to provide you with some worked examples.

Enforcement penalties for renting out non-compliant property remain as before and will result in the publication of non-compliance and a fine up to £150,000. Providing false or misleading information or failing to comply with a compliance notice will result in a maximum fine of £5,000 and further publication.