Twain was referring to the premature publication of his obituary notice. He was happily able to tell the world he was still alive.
Publication by the Department for Energy and Climate Change (DECC) of the Private Rented Sector Energy Efficiency Regulations (Domestic), which sets out the views of the Government on proposals for energy efficiency in the private rented sector (PRS), led to immediate reports that properties with EPC ratings (placing them in Bands F and G) could be doomed.
On the face of it, that’s what the document says. But read it and the story is less pessimistic. Owners of such properties should not give up hope.
The basic premise of the document, a response to a wide consultation on making let properties more energy efficient, is that from April 1, 2016, domestic tenants will have the right to request consent to make energy efficiency improvements and landlords would need to respond within a month under the regulations that have been laid before Parliament.
The minimum energy efficiency standard applied to all categories of domestic private rented property will be set at E energy performance, in line with the non-domestic sector. From April 1, 2018, the regulations will apply upon the granting of a new tenancy to a new or existing tenant, extending from April 1, 2020, to all privately rented property within the scope of the regulations.
But, crucially, there is the ability for landlords to seek exemptions. The essential paragraph reads:
Where a landlord considers an exemption applies allowing them to let their property below the minimum energy efficiency standard, the landlord will need to provide such evidence to a centralised register, the “PRS Exemptions Register.” Landlords may be required to submit relevant evidence and details of their exemption to the Register. The Government may use this information to assist local authorities in targeting their enforcement activity.
There will be a number of safeguards to ensure that only appropriate, permissible and cost effective improvements are required. Landlords will be eligible for an exemption from reaching the minimum standard where they can evidence that one of the following applies:
- They have undertaken those improvements that are cost-effective but remain below an E EPC rating. Cost effective measures are those improvements that are capable of being installed within the Green Deal’s Golden Rule. This ensures that landlords will not face upfront or net costs for the improvement works.
- They are unable to install those improvements that are cost-effective without upfront cost because the funding entails Green Deal finance, and they or their tenant fail the relevant credit checks.
- The landlord is required by a contractual or legislative obligation to obtain a third party’s consent or permission to undertake relevant improvements relating to the minimum standard, and such consent was denied, or was provided with unreasonable conditions.
- The landlord requires consent, and the occupying tenant withholds that consent.
- Measures required to improve the property are evidenced by a suitably qualified independent surveyor, for example from the Royal Institution of Chartered Surveyors (RICS), as expected to cause a capital devaluation of the property of more than 5%. Only those measures that are expected to cause such devaluation would be exempt from installation.
- The regulations will also include specific protections relating to wall insulation improvements as an additional safeguard for the minority of situations where such insulation may not be appropriate. There will be no requirement to install wall insulation under the regulations where the landlord has obtained a written opinion from a suitably qualified person or from the independent installer engaged to install the measure advising that it is not an appropriate improvement due to its potential negative impact on the fabric or structure of the property (or the building of which it is part).
The long term hope is that the ratio between the cost of implementing change in comparison to the value of savings to be made in the domestic energy bill will naturally adjust to the point where they coincide in the vast majority of cases. The recent fall in oil prices, and consumers’ hope that domestic energy prices will follow more closely, might damage these prospects in the short term.
However, energy prices will inevitably rise again in tandem with technology improving to make energy efficiency more easily achievable at affordable costs.
Coupled with this is the knowledge that no Government will want to willingly remove otherwise good housing stock from the PRS. The political colour of the UK Government at Whitsun is likely to be very different from that of the Government on the May Day bank holiday. But whether the predominant shade is blue or red, and whatever fringe parties are tugging at the sides of the wheel to get their own policies into play, neither major party will steer a course that sees homes with lower energy efficiency ratings removed from the PRS in the foreseeable future.
Labour will not want to deny people perfectly good homes when voices are already loudly raised about the amount of good housing stock that stands empty. The Conservatives, with their commitment to austerity, will not want to fund the replacements for these homes from the public purse. Of course, nobody will get away with using the regulations for letting seriously sub-standard property and nor should they.
The Government is promising guidance between now and the implementation of the regulations from April 1 next year and there’s a requirement to review the operation and effect of them at no less than five yearly intervals, with the first in 2020 by which time it will have evidence about the progress and effectiveness of the regime.
Far from being a portent of doom for domestic rental properties in Bands F and G, look on the proposals as a long term fitness regime for the less able to be brought up to peak physical performance and with the proviso that those who can’t won’t be relegated to the scrap heap.
Details of the legislation can be found here.
Lisa Simon,
Partner Head of Residential Lettings
T: 020 7518 3234
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