Changes to EPC regulations
Wed 23 Aug 2017
Research has found that global warming is one of the two issues people are most concerned about (the other being terrorism). With domestic properties being identified by the government as a major contributor to greenhouse gas (GHG) emissions, the new regulations on minimum energy efficiency are incredibly important. Energy Performance Certificates were introduced to provide a purchaser or a potential tenant with similar information relating to a property's energy 'costs' and therefore play a crucial role when selling your property.
New ‘Minimum Energy Efficiency Standards’ are being introduced next year and will mean that if your property doesn't have a minimum 'E' rating, it will be unlawful to rent it out.
When will the Energy Performance Certificate regulations be implemented?
The new regulations will come into effect on the 1st April 2018, having been confirmed by the government on the 5th February 2015. They will apply to both commercial and domestic properties, with the minimum energy efficiency standard set at an E EPC rating. A rating of F or G will fall in the bracket known as Minimum Energy Efficiency Standard (MEES). This applies to all new tenancies granted after the date, however from April 2020 the efficiency rating of all rented properties must be E or better.
What buildings will the regulations apply to?
The new regulations apply to all non-domestic properties let on both an assured and regulated tenancy (for the purposes of the Housing Act 1998 and the Rent Act 1977). All commercial properties in the A1 – D2 usage class will be affected. It will not affect properties where the tenancies are less than 6 months or over 99 years, or where the building does not require an EPC (e.g. holiday lets, workshops, industrial sites and certain listed buildings).
Why is the Minimum Energy Efficiency Standard being introduced?
A ratings of F or G implies that the building could potentially cause environmental problems. The government has identified building emissions as a major contributor to Greenhouse Gas emissions. These new regulations are necessary if we hope to meet the carbon reduction targets for 2020 and 2050 as set in the Climate Change Act (2008).
Who will be affected by the new Energy Performance Certificate regulations?
The Department of Energy & Climate Change report that nearly one in ten domestic properties fall below the E rating and nearly one in five non-domestic. These numbers suggest that a significant proportion of UK houses will be affected by these regulations. With building regulations ensuring that recently built properties sit well above the lower energy efficiency standards, the Minimum Energy Efficiency Standards will affect older buildings throughout the UK.
Landlords with properties within this boundary are legally obliged to carry out upgrades to the building to improve the rating. Should they choose not to do this, the penalty for renting out a domestic property in breach of the MEES regulations for less than three months will be £2,000. After this three month period the penalty increases to £4,000. If a landlord breaches the Minimum Energy Efficiency Standard regulation, this will be displayed on the exemptions register for a minimum of 12 months.
Which properties are exempt from the MEES regulations?
There are three cases in which the above does not apply. These are valid for five years and cannot be transferred to a new landlord should the property be sold:
•The ‘Golden Rule’: This applies to two instances: the first where an independent assessor has determined that all possible energy efficiency improvements have been made and the second applies to the conclusion that the possible improvements that can be made would not pay for themselves in seven years through energy savings.
•Devaluation: The property is exempt from the MEES regulations should an independent surveyor establish that the required energy efficiency improvements are likely to reduce the value of the property by more than 5%.
•Third Party Consent: If the tenant, a superior landlord or planning authorities refuse to give their consent for the energy efficiency improvements to be carried out, or conditions are given which the landlord cannot comply to, then the MEES regulations are waved.
What can you do as a landlord to prepare?
With just under a year to go until these regulations come into effect, you can prepare now by:
•Carrying out new energy assessments to ensure your EPC ratings are correct for properties you think may fall within the MEES regulations.
•Assessing current contracts to work out a timeline for potential planned works (to be in line with break clauses, renewal dates and end dates).