Survey and Test

Why can’t inefficient buildings be rented after 2018

Energy efficiency management

The energy Act 2011 places a duty on the secretary of state to bring into force regulations to improve the energy efficiency of buildings in the domestic and non-domestic private rented sectors across England and Wales. Eligible properties within these sectors must be improved to a specified minimum standard by the 1st April 2018. Buildings not required to obtain an Energy Performance Certificate (EPC), such as those awaiting demolition will not be within the scope of the regulations.

Domestic private rented sector energy efficiency proposed regulations

The minimum standard regulations are set out to improve the least energy efficient properties in the sector, which are those with an F or a G EPC rating. In 2011, 8% of private rented sector properties in England had an EPC rating of F and 3% a rating of G. These low levels of efficiency contribute to the high level of fuel poverty for households within this sector, an estimated 21%.

Tenants energy efficiency improvement regulations must be in force by 1st April 2016 and will empower tenants to request consent for energy efficiency measures that may not unreasonably be refused by the landlord. These tenants improvement regulations will apply to any property regardless of the EPC rating, whilst the minimum standard regulations will only apply to properties with an F or a G EPC rating.

Financing

Landlords will be allowed to refuse a tenants request where the funding route proposed by the tenant entails net or upfront costs to the landlord for the improvements to be made. Funding options available to tenants to ensure there are no upfront or net costs to the landlords include Green Deal finance, ECO, local or national grants and the tenants own sources. The tenant is required to obtain an EPC or Green Deal Assessment to secure quotes for funding the proposed improvements before providing a written request to their landlord. Under the minimum standards regulation where a property falls below an E EPC rating, the landlord would only be required to undertake improvements that could be funded without any upfront or net costs through the use of Green Deal finance, ECO or other incentives.

The Government plans to lay out the regulations by the start of 2015 in order to provide certainty and clarity to the market as to what the regulations will require, giving businesses time to plan and implement their response ahead of the regulations coming into force (Please read “Private Rented Sector Energy Efficiency Regulations (Domestic)”, published on the 22nd July 2014 by the Department of Energy & Climate Change for the full consultation).

Non – domestic private rented sector energy efficiency proposed regulations

The regulations are very similar to the domestic sector as they intend to tackle the very least energy efficient properties, those rated F or G on their EPC rating. The regulations will be implemented for slightly different reasons compared to the domestic sector, where the primary role of the regulations are to reduce domestic fuel poverty. Increasing energy efficiency of the non domestic property stock will help smooth peaks in seasonal energy demand, reduce greenhouse gas emissions and thereby increase energy security. Increased demand for energy efficiency measures is also likely to support growth and jobs within the green construction industry and the wider supply chain.

Financing

There are no tenants energy efficiency improvement regulations included in the non-domestic sector, however the financing for the minimum standard regulations are very similar to the domestic sector. When a property falls below an E EPC rating, the landlord would only be required to make those improvements which could be made at no upfront cost, for example through a Green Deal finance arrangement. Whilst the Green Deal Finance Company is currently not offering Green Deal finance on non-domestic properties, it continues to keep this under review. To assist those landlords who decide not to use Green Deal finance, the Government is consulting on whether landlords could be permitted to demonstrate compliance by undertaking all improvements that pay for themselves in energy bill savings within a prescribed period.

Alongside the domestic sector, the Government plans to lay out the regulations by the start of 2015 (Please read “Private Rented Sector Energy Efficiency Regulations (Non-Domestic)”, published on the 22nd July 2014 by the Department of Energy & Climate Change for the full consultation).