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To be a successful landlord it is important to stay on top of property legislation. This is not just a matter of keeping tenants happy: careless landlords often find themselves having to pay huge fees, especially if they offend across multiple properties.

One of the most important changes in recent history is the implementation of the Minimum Energy Efficiency Standard (MEES). While properties were previously required to have a valid energy performance certificate (EPC), this new legislation means that properties can only be let when they have a rating of E or above. In other words, creating a tenancy agreement for a non-exempt property with a rating of F or G is now against the law.

However, this need not be seen as a hassle. Improving the energy efficiency of a property will not only lower its monthly heating bills, it can also help to attract higher paying tenants who are after features like double glazing or loft insulation. On the other hand, failing to adhere to this law can result in fines of up to £5k per tenancy!

So, what exactly do landlords need to know about energy efficiency standards?

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What is an energy performance certificate (EPC)?

An EPC is a professional assessment of a property’s energy efficiency. It takes into account individual factors unique to each property, before providing an overall rating from A to G, with G being the lowest grade possible. 

That said, an EPC is more than just a rating. It will also offer useful recommendations on how the energy efficiency of a property can be improved. This can be invaluable information if your rating needs to be raised!

Energy performance certificates are usually created by domestic energy assessors, though professional electricians may also be qualified. They generally cost between £60 and £120 and are valid for ten years. 

Remember, a valid EPC is required to even put a property on the market, regardless of its rating.

Do all rental properties require an EPC?

While it is true that properties require an EPC before they can be put on the market, either to rent or sell, not all properties are subject to the MEES. 

For example, your rental property could be exempt from the new minimum standard if you can show:

  • The building is officially listed or protected and requirements to raise its energy efficiency would unacceptably alter it
  • It is a temporary building which will only be used for 2 years or less
  • It is due to be demolished by the seller or landlord and all relevant planning and conservation consents are already in place
  • It is a detached building with less than 50 square meters of floor space
  • The buyer or tenant has applied for planning permission to demolish it
  • It is due to be sold or rented out with vacant possession

If your property is exempt, it is important that you register it via the Public Exemptions Register, or you may still be held accountable for the new rules.

When a property does require an EPC, the landlord cannot grant a tenancy for it to new or existing tenants if it has a rating of F or G. As of April 2020, landlords may not continue letting properties that fall below the new minimum standard.

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How can I raise the energy efficiency of my property?

Luckily for landlords, they are not necessarily expected to pay for energy related home improvements completely out of their own pockets. There are a number of potential grants from the Green Deal, ECO and even local authorities.

There are a number of popular improvement projects which can boost the energy efficiency of a property, such as installing insulation, replacing an inefficient boiler or introducing renewable energy. However, which method will work best varies from property to property. This is why it is important to have a valid EPC, as this will list the best jobs to suit you.

You may want to start by getting in contact with your energy supplier. The energy company obligation (ECO) gives ‘obligated suppliers’ green targets based on their share of the domestic energy market. In other words, big companies like British Gas and EDF Energy each have targets to improve energy efficiency by a certain amount. 

This is usually done via supporting home improvement projects. If you get in touch with your supplier, they may be willing to help pay for any necessary work. Some will even help facilitate jobs for non-customers if it means meeting their targets.

An important thing to keep in mind is that landlords are not expected to carry out work which is not considered appropriate, which they cannot get consent for or which is cost-neutral. If you can demonstrate this with documentation, you could be eligible for a five year exemption.

You could have a case for exemption if:

  • You have made cost-effective improvements, but the rating remains below E. A ‘cost-effective’ improvement is one where the cost is less than the estimated amount of money which would be saved over a 25 year period (in other words, work which will not eventually pay for itself)
  • You have been unable to obtain funding for the necessary work via ECO, Green Deal Finance or grants from your local authority. In this case you would need evidence of a formal application for consent which was denied or imposed with unreasonable conditions
  • Your occupying tenants have withheld consent for an improvement. Landlords are usually entitled to perform whatever work they feel is necessary, provided they give tenants enough notice and the work does not prevent their use of the property for which they are paying
  • The improvements required for the property are expected to cause a capital devaluation of more than 5% according to an accredited independent surveyor
  • A suitably qualified person or installer has informed you that installing insulation would have a negative impact on the structure of your property (remember, this rule is just for insulation)

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What if my property is not compliant?

The rules for energy efficiency are enforced by local authorities. If they suspect that a residence is non-compliant and the landlord cannot provide evidence of an exemption, the landlord can be served with a ‘compliance notice’ requesting further information.

In a case like this, the landlord will essentially be facing a case of ‘guilty until proven innocent’. If they cannot provide the documentation to prove that they have acted in accordance with the law, or if what they provide is insufficient, they can be served with a ‘penalty notice’.

Penalty notices for a single property can be cumulative, up to the value of £5,000. A landlord could be fined for:

  • Letting out a non-compliant property for less than three months (£2,000)
  • Letting out a non-compliant property for more than three months (£4,000)
  • Providing false or misleading information to the PRS exemption register (£2,000)
  • Failing to comply with a compliance notice (£2,000)

It is important to keep in mind that further penalties may be awarded when an offending landlord takes on a new tenant, or once the new regulatory backstop comes into effect. Landlords with a portfolio of offending properties could easily end up seeing fines in the tens of thousands!

If you receive a notice and feel that it is unfair, you can request a review. The council will then assess it and, if they feel the evidence is not satisfactory, withdraw the notice. However, if the notice is upheld then you will be required to appeal to the First Tier Tribunal.

Valid reasons for an appeal include:

  • The notice was issued in error
  • The notice does not comply with regulations
  • Given the circumstances it is inappropriate that the penalty notice was served