MINIMUM ENERGY EFFICIENCY STANDARDS OUTLINED BY THE GOVERNMENT
EPCs (Energy Performance Certificates) were first introduced in 2007 as part of HIPs (Home Information Packs) for 4 or more-bedroom properties in England and Wales. Over time, these regulations extended to smaller homes. The scheme for HIPs was removed in May 2010, however, the requirement for EPCs continued.
The energy survey needed to produce an EPC is performed by an assessor who visits the property to examine key items, such as loft insulation, domestic boiler, hot water tank, radiators, windows for double glazing, and so on. Upon assessment, EPCs provide ratings that indicate the property’s energy performance, as well as its environmental impact. The certificate created, presents energy efficiency on a scale of A to G. The average property in the UK is rated as band D or E. Band A are the most efficient homes and have the least amount of carbon dioxide (CO2) emissions, resulting in the lower fuel bills. Band F and G rated properties waste energy.
Recent data shows that 45% of F and G rated households are classified as fuel poor. They impose unnecessary cost on tenants and the wider economy, and they contribute to avoidable greenhouse gas emissions. Increasing the energy efficiency of our domestic rental stock can help manage the energy costs of tenants, improve the condition of properties and help reduce maintenance costs.
The EPC regulations fulfil a duty placed on the Secretary of State in the Energy Act 2011 to introduce Regulations to improve the energy efficiency of buildings in the domestic and domestic private rented sector in England or Wales. Increasing a property’s energy efficiency may also increase its market value. Evidence shows that a significant proportion of domestic UK landlords invest in property because of the potential for long-term capital appreciation. Investing in energy efficiency means that those landlords may benefit from a further capital value boost when they do finally look to sell an improved property.
The data collected from the property examination is recorded on the National Register, with a validated status for 10 years until the EPCs imperative renewal, estimated at a cost of £60. This process highlights the examined property’s energy efficiency defects, suggesting improvement works to be carried out by the Landlord.
In February 2018, new minimum energy efficiency standards were charted by the Government, due to the end of State aid for the Green deal. This means The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, introduced new measures to improve the energy efficiency of private rented property under the Energy Act 2011. Part three of the Regulations now outlines that private sector landlords must not grant a new tenancy of a property, including an extension or renewal after 1 April 2018, where the EPC is below the minimum level of energy efficiency for private rented properties of band E.
A landlord of an F or G rated property is be expected to install all energy efficiency improvements required to reach an EPC E, where funding is available to cover the cost. A combination of funding can come from a Green Deal Plan, Energy Company Obligation or similar schemes with funding from Central Government, local authority, or third party at no cost to the landlord.
However, research sourced from Spec, property technology solutions, suggests that an estimate of 2.5 million UK properties with EPCs are “incorrectly rated”. This means landlords are potentially unaware that they are “illegally letting” their properties. If a residential property does not meet the necessary standards above band E, this can result in a failed EPC. Levied fines of up to £5000 can be enforced, every three months that the property remains below the set Government standards. Where a landlord registers false or misleading information on the PRS Exemptions Register penalties are a fine not exceeding £1,000 and a Publication Penalty.
Anthony Browne, Senior Advisor to Spec stated: “Inaccurate EPCs present serious challenges and risks not only to property professionals, consumers and estate agents – but also the environment. It means tens of thousands of landlords are unwittingly renting out their properties, opening them up to the risk of fines of thousands of pounds through no fault of their own”. Browne warns around half of EPCs are “so inaccurate” that the properties would need to be re-graded and therefore a “significant number” of properties are below the legal standard (Grade E) for rent.
An estimated 35,000 E rated properties – worth nearly £8 billion – are below the legal standard for the residential lettings market. One in four EPCs recorded the size of a property so inaccurately, that it varies by more than 10% from the actual measurement. Floor space is a key component of the calculation carried out by Domestic Energy Assessors (DEAs) to give a property its energy rating. EPC scores that would likely be downgraded if the floor space was accurately measured.
However, a landlord will be successfully allowed to let the property if they have undertaken all relevant energy efficiency improvements for the property or there are no relevant improvements that could be made. The exemption applies for a period of five years from the date on which the exemption is registered. Landlords will only be able to rely on one of these exemptions if they have registered it in the publicly accessible national PRS Exemptions Register.
The Regulations are intended to ensure that those tenants who most need more efficient homes, particularly vulnerable people, can enjoy a much better living environment and lower energy bills. Increased demand for energy efficiency measures is likely to support growth and jobs within the green construction industry and the wider supply chain for energy efficiency. Greater competition within these markets may also spur innovation, lowering the end costs of installing measures to business and households, and help sustain jobs.