Because non-conformity could cost you up to £150,000!
The new energy efficiency requirements
The new Minimum Energy Efficient Standards (MEES) come into effect in April 2018 and will affect you if you are a buy to let landlord. The 2015 Energy Efficiency Regulations set out minimum energy efficiency standards for properties in England and Wales.
These regulations make it unlawful for landlords to lease or grant a new lease for properties that have an energy performance certificate (EPC) rating below E, from 1 April 2018, unless the property is registered as an exemption.
After 1 April 2023, landlords must register an exemption for any building with an EPC rating of less than E if they wish to let the building.
Landlords can let a building if any of the following exemptions apply:
- Where an independent assessor determines that all relevant energy efficiency improvements have been made to the property or that improvements that could be made but have not been made would not pay for themselves through energy savings within seven years. Relevant energy efficiency improvements may include such things as double-glazing and pipework insulation.
- Where an independent surveyor determines that the relevant energy efficiency improvements that could be made to the property are likely to reduce the market value of the property by more than 5%.
- Where 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 as above but the occupying tenant withholds that consent.
You need to register an exemption on the central government PRS Exemptions Register. The exemptions are valid for five years only and cannot be transferred to a new landlord.
The penalties for non-compliance
The penalty for renting out a property for a period of fewer than three months in breach of the MEES Regulations will be equivalent to 10% of the property’s rateable value, subject to a minimum penalty of £5,000 and a maximum of £50,000. After three months, the penalty rises to 20% of the rateable value, with a minimum penalty of £10,000 and a maximum of £150,000.
Where a property is let in breach of the MEES Regulations or where a penalty is imposed, the lease will still remain valid.
The rationale behind the new requirements
The built environment has been identified by the government as a major contributor to Greenhouse Gas (GHG) emissions. Building Regulations ensure that new properties meet current energy efficiency standards and MEES will ensure that older buildings play their part.
The rental market has historically had the highest proportion of properties falling in the F and G bands. The minimum standard could rise in future.
You need to take action now
If you don’t already know, your first step as a landlord should be to check your current rating. If the provisions do apply to you, you may then need professional advice about whether any of the exemptions are applicable to you and if they are, you need to register them.
You will also, of course, need to balance the financial cost of upgrading non-compliant buildings against the potential loss of income if a property cannot be rented out and the cost of a potential fine.
It’s not all gloom and doom
For forward thinking landlords, there is the potential to increase rental and asset value by making energy efficiency improvements and combining these with other upgrades.
And both finally and worryingly…
According to a report published by Landlord Today earlier this month research has found that 25% of landlords do not know about the new requirements, 42% admitted to being ‘only vaguely aware’ of the new rules and 27% said that they do not even know the EPC rating of their property to begin with.
If that sounds like you, now really is the time to find out.
Graham Faulkner is Branch Director of EweMove Dorking and he’s also a portfolio landlord, as well as specialising in helping other landlords. Apart from his own experience and expertise, he can also recommend the right professionals, as tried and tested by him, to advise you.
Multi award winning EweMove in Dorking is a residential property sales and lettings agency who pride themselves on being refreshingly different and standing out from the crowd. EweMove Dorking covers from Ockley to Oxshott.
Enquiries to 01306 406 506 / 01372 701 702, or via email to email@example.com