What will minimum energy efficiency standards mean for landlords?

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Landlords of all forms of let property have just over a year to ensure the buildings they lease meet minimum energy efficiency standards, subject to new laws going ahead as scheduled. In this Q&A, rural property adviser Julie Liddle explains what action needs to be taken to ensure compliance.

I already have energy performance certificates for my properties, why I am hearing so much about minimum energy efficiency standards?

The requirement to provide an energy performance certificate (EPC) on the sale or letting of a property has been around for some time. However, in addition to these requirements, minimum energy efficiency standards (“MEES”) will come into effect for both private rented properties and domestic private rented properties from 1 April 2018.

What does this mean for me?

If government pushes these reforms through, it means from 1 April 2018, every landlord in England and Wales must ensure their buildings meet the standards or risk fines of up to £150,000 per non-domestic property and £5,000 per domestic property. Similar requirements exist for large non-domestic buildings in Scotland, though a domestic requirement is yet to be finalised. Put simply, the rules mean there can be no letting of properties where energy efficiency standards of those properties fall below the prescribed standard.

What standard will need to be met?

Under the MEES regime, most properties will need an Energy Performance Certificate (EPC) rating of E or better. From 1 April 2018, the regulations will cover new or renewed lettings of domestic and commercial properties. From 2020, MEES will apply to all domestic properties; from 2023, they will cover all commercial leases.

What do I need to do?

Such is the backlash from landlords over these controversial changes, there’s speculation as to whether they will become law in line with the current timetable, with many questioning whether they will be brought in at all.

However, in the absence of any information to the contrary, now is the time to start preparing for this potentially expensive and time-consuming change. Property owners should investigate what is needed to meet the required standards. This may involve improving insulation, installing a new boiler or double glazing, or even investing in renewable heating technologies, such as heat pumps and solar panels.

Property owners may be tempted to do the bare minimum, but it’s clear that in its quest to drive ever-greater energy efficiency standards, MEES will continue to become more stringent over time, so what is rated as an E on an EPC today may well be an F, come 2020.

With this in mind, it may be worth investing now to reach a level E or higher to avoid having to go through the process again in a few years’ time. It’s also worth noting that the rules on EPCs were tightened in 2012, and it’s thought that many issued before this date are inaccurate. Check your EPCs carefully, and if you have doubts, it may be worth getting some properties re-examined. Seek specialist advice first.

Exactly what properties will be affected? Are there any exemptions?

Landlords need to know which properties require an EPC and what properties are included in this first phase of MEES. Listed buildings are exempt from the legislation, but this is by no means an automatic blanket exemption and further advice and consultation with your local planning authority may be needed. There are other exemptions, for example if a tenant refuses to allow improvements, or if the lease is for less than six months.

What if I can’t afford to bring all my properties up to the required standard?

Some details are still being ironed out, but it’s expected there will be an exemption surrounding financial viability of meeting MEES. This may be in the form of a maximum cost for the landlord, for example £4,000 per property, or a minimum payback time on the investment, for example six years. There may be discounts and funding options available under existing energy schemes, so it’s worth checking with your local authority or professional adviser.

What should I do next?

As always, professional advice is essential and this should be taken before you do anything, particularly as exemptions may exist for your properties. The main thing to remember is that taking action now means you can plan for improvements to be carried out in plenty of time which could prevent significant costs arising further down the line.

For advice on any rural land and property issues, call Julie on 01768 254 354.