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Death of Let Property in EPC Band F & G?

Tuesday, 17th March, 2015

Reports of the death of poorer-rated, less energy-efficient domestic rental properties have been greatly exaggerated.

A publication by the Department for Energy and Climate Change (DECC) of the Private Rented Sectors (PRS) Energy Efficiency Regulations (Domestic), which sets out the views of the Government on proposals for energy efficiency in the PRS, led to immediate reports that properties with EPC ratings placing them in Bands F and G could be doomed illegal to let. 

On the face of it, that's what the document says. But the full story is less pessimistic.

THE FACTS

The basic premise of the document, a response to a wide consultation on making let properties more energy efficient, is that from April 1 2016, domestic tenants will have the right to request consent to make energy efficiency improvements and landlords would need to respond within a month under the regulations.

The minimum energy efficiency standard for PRS homes will be set at E, in line with the non-domestic sector. From 1st April 2018, the regulations will apply to a new tenancy to a new or existing tenant, and from 1st April 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". 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. There will be a number of safeguards to ensure that only the appropriate, permissible and cost effective improvements are required. Landlords will be eligible for an exemption where they can provide evidence that one of the following applies:
- They have taken those improvements that are cost-effective (capable of being installed within the Green Deal's Golden Rule) but remain below an E EPC rating. This ensures that landlords will not face upfront or net costs for the improvement works.
- They are unable to install those improvements that are cost-effective without upfront cost because the funding entails Green Deal finance, and they or their tenant fail the relevant credit checks.
- The landlord is required by 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, and the occupying tenant withholds that consent.

It's also true that even with a new political regime, no Government will steer a course that see homes with lower energy efficiency ratings removed from the PRS in the foreseeable future. Of course, nobody will get away with using the regulations for letting seriously sub-standard property and nor should they.

The Government is promising guidance between now and the implementation of the regulations from 1st of April 2016 and there's a requirement to review the operation and effect 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. 

Far from being a portent of doom for domestic rental properties, in Bands F and G, we should look on the proposals as a longterm fitness regime for the less able to be brought up to peak physical performance, with the proviso that those who can't talk will not be relegated to the scrap heap. 





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