New minimum energy efficiency laws for landlords

Here’s what you need to know

Landlords have just under six months to ensure their rental properties meet the new Minimum Energy Efficiency Standards (MEES).

Portico explains how the new MEES will work in regards to EPC ratings, the impact the rules will have on landlords, and the steps that you should take now to avoid hefty fines.

What’s an EPC?

If you’re unaware, an Energy Performance Certificate (EPC) is a guide that potential buyers or tenants get when they look at a property. Every property that’s put up for sale or for rent is required to have an EPC, which usually costs between £60 and £120.

It uses a Grade from A – G to show how efficiently a home uses energy, plus includes the cost of running a home and recommendations of how to improve the energy efficiency of the property.

Grade A indicates an energy efficient, well-insulated home (that’s usually modern), and Grade G typically means a draughty old building.

What are the new Minimum Energy Efficiency Standards rules?

As of April 2018, all buildings within the scope of MEES must have a minimum Energy Performance Certificate rating of E, or they will be illegal to rent out.

In other words, any homes rated F or G must be improved or immediately taken off the rental market – unless the landlord registers an exemption.

What are the penalties?

An alarming one in 10 residential properties currently have an EPC rating of F or G and so would not meet the new standards.

A civil penalty of up to £4,000 will be imposed for breaches, so it’s imperative you make sure your rental property meets energy efficiency standards.

Are there any exemptions?

The government has recently announced that they will be opening an exemptions register from next month, which should shed more light on the matter.

However, we already know that the new minimum energy efficiency standards will NOT apply to:

• Buildings which are not required to have an EPC, such as certain listed buildings
• Temporary properties and holidays lets or Airbnb rental
• Buildings where the EPC is over 10 years old or where there is no EPC
• Buildings let on tenancies of over 99 years or less than 6 months (where such tenancy does not contain a right of renewal)
• Where an independent surveyor determines that the relevant energy efficiency improvements would reduce the value of the property by more than five per cent
• The improvements are deemed financially unviable as they do not pay for themselves through energy cost savings within a seven year time frame
• If the landlord is unable to get consent from a third party to carry out the energy improvements, for example from the local authority or an incumbent tenant
• A detached building with a total floor space under 538 sft
• A building that is due to be demolished by the seller or landlord and they have all the relevant planning and conservation consents

All other rental properties will have to meet the new MEES rules.

So what should landlords do?

Clearly landlords will want to avoid fines, so now is the time to make sure your rental property meets the new standards. We suggest the following actions:

• Get an EPC assessment on your rental property
• Energy efficiency improvement works would need to be implemented before April 2018
• There is a high likelihood that the minimum energy standards proposed for April 2018 will be raised in the future – so it’s certainly worthwhile assessing your rental property’s energy efficiency now.