Landlords of both domestic and non-domestic private rented premises should start preparing for new regulations requiring many of them to make energy efficiency improvements to their rental properties.
The regulations will have two phases. From 1 April 2016 landlords of domestic properties must consent to certain energy efficiency improvements their existing tenants may want to make. From 1 April 2018 landlords will have further obligations to ensure their properties have achieved at least an ‘E’ energy rating before renting them out for the first time or renewing tenancies.
What do Landlords have to do now?
From 1 April 2016, private landlords of domestic properties in England and Wales must consent to specific types of energy efficiency improvements their tenants want to carry out. Tenants are allowed to ask for reasonable relevant energy efficiency improvements. It will be the responsibility of the tenants to ensure that the works are funded – no upfront costs should fall on the landlord, unless the landlord agrees to contribute.
What is a reasonable improvement?
A relevant improvement will only be reasonable if it can be wholly financed, at no cost to the landlord, by funding from central government, a local authority or any other person, or by the tenant itself, or by a combination of the two. The landlord may also refuse consent to improvements if the works would reduce the market value of the property by more than 5% or consent from a third party has been refused.
When a landlord receives a request, he or she will need to provide an initial response within one month of service of the tenant’s request. This must include:
• whether superior landlord’s consent is required (if so, the landlord must confirm that the superior landlord has been served with a copy of the tenant’s request);
• whether the landlord requires more evidence from the tenant before it can decide whether to consent;
• whether the landlord intends to serve a counter-proposal;
• and that the landlord will serve a full response.
If the landlord serves a counter proposal , it must be served within 2 months of service of the tenant’s request.
Within 4 months of service of the tenant’s request, the landlord must serve its full response.
A tenant may make an application to the First-tier Tribunal if the landlord does not follow the prescribed procedure.
There are circumstances in which the tenant cannot make a request and these include:
• where the landlord offered the tenant similar improvements within the preceding 6 months and the tenant refused consent;
• where the tenant, in the preceding 6 months, made a request in respect of which third party consent was required and was not obtained, or where it was shown that the improvements would lead to a decrease in the value of the property;
• where the tenant, or the landlord, has served notice to end the tenancy; and
• where the landlord has commenced proceedings for breach of covenant.
What will Landlords have to do from 1 April 2018?
From 1 April 2018, private landlords will not be able to enter into new tenancies for either domestic or non-domestic properties that have not achieved at least an ‘E’ energy rating. This requirement also applies to all tenancies that are as a result of an extension or renewal of an existing tenancy.
There is a limited range of exemptions and exceptions, including properties:
• that do not need an Energy Performance Certificate under the relevant regulations;
• subject to leases for six months or less (though they are not exempt if the same tenant has occupied the property for more than 12 months);
• subject to leases for 99 years or more;
• where the landlord has carried out all ‘relevant energy efficiency improvements’ or no such improvements can be made;
• whose landlord cannot get the necessary consents (having made reasonable efforts) or a consent is given but is subject to unreasonable conditions;
• where the necessary works would reduce the property’s market value by 5 per cent or more.
The exemptions are recorded in a central register and expire after five years, unless renewed.
From 1 April 2020, all domestic property (including existing tenancies) must have the minimum E rating. Landlords of non-domestic properties will have until 1 April 2023 to ensure they meet the E rating for existing tenancies.
Penalties – Domestic Properties
Where a domestic property has been let which does not meet the minimum standard, the tenancy remains valid between the landlord and tenant but a fine will be payable by the landlord of up to £2000 for a breach of less than 3 months or up to £4000 for a breach of over 3 months.
Penalties – Non- Domestic Properties
Fines can be much greater for non-domestic properties depending on their size. For a breach of less than three months, there is penalty not exceeding whichever is the greater of £5,000, or 10% of the rateable value of the property. For breaches of more than three months duration, a fine may be imposed that is not more than whichever is the greater of £10,000, and 20% of the rateable value of the property.
• Landlords should start reviewing their property portfolios to identify properties that will require work to achieve an ‘E’ energy rating, when they may be able to carry works out, and whether tenants may ask for consent to make energy efficiency improvements.
Laura Albon has been working in litigation for nearly 10 years. She works almost exclusively with property investors and agents across the whole country. She trained with the partners of Helix Law and has extensive experience in possession, service charge recovery, breach of covenant and commercial contract claims. She is able to pursue matters through the court and through The First Tier Tribunal (formerly the Leasehold Valuation Tribunal or LVT).
This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.