Carter Jonas
Carter Jonas

Energy efficiency proposals and rural tenancies

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 were about to become unlettable.

The regulations apply to the domestic private rented sector in England and Wales. This is defined in section 42 of the Energy Act 2011 as: properties let under an assured tenancy for the purposes of the Housing Act 1988, or a tenancy which is a regulated tenancy for the purposes of the Rent Act 1977.

The Government has added additional tenancy types, prescribing the following properties to bring them within scope of the regulations:

(a) on a tenancy which is an assured agricultural occupancy for the purposes of section 24 of the Housing Act 1988

(b) on a protected tenancy within the meaning given in section 3(6) of the Rent (Agriculture) Act 1976, or

(c) on a statutory tenancy within the meaning given in section 4(6) of the Rent (Agriculture) Act 1976.

The basic premise of the document is that from April 1, 2016, domestic tenants will have the right to request consent to make energy efficiency improvements under the regulations that have been laid before Parliament. Landlords would need to provide a response to a tenant’s request within one month.

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 tenant or a new tenancy to an 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.

It appears that the previous “Get Out of Jail Free Card” that applied if the cost of upgrading the property was greater than the financial benefits to be gained from the upgrade still applies. The regulations will detail specific circumstances under which a landlord can refuse consent for the tenant to implement energy efficiency measures.

Landlords can also claim exemption where a tenant refuses their proposals to improve efficiency. There will be an appeals tribunal system.

The regulations will include a number of safeguards to ensure that only appropriate, permissible and cost effective improvements are required under the regulations.

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.

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.

Look on the proposals as a long term fitness regime for the less able properties in Bands F and G 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.

The legislation can be found by clicking here.

Lisa SimonMARLA

Partner - Head of National Residential Lettings

Lisa is the head of Residential Lettings at Carter Jonas; she is based in our Knightsbridge and Chelsea office where she started her career and advises on all aspects of letting and managing propert...

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