From and including 1 April 2020, Landlords of residential private rented property will be prohibited from continuing to let a “sub-standard” property to tenants pursuant to Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the “MEES Regulations”).
Current position
As of 1 April 2018, landlords of private residential property were prohibited from granting or renewing leases without a valid EPC with at least a rating of “E”. Any property with a rating of “F” or “G” were deemed “sub-standard” and any new lettings of such property were (and continue to be) unlawful. Enforcement action can be taken by local authorities against any landlord in breach of these regulations.
This is subject to certain exemptions, which are set out below. These exemptions will continue to apply following 1 April 2020.
What will be different on 1 April 2020?
As of 1 April 2020, private residential landlords will be prohibited from continuing to let a sub-standard domestic private rented property. Although any leases will remain valid and enforceable, the landlord may face enforcement action if the property is rated “F” or “G” in respect of its energy performance.
Enforcement will be in the form of financial penalties, as well as the negative publicity of being a “sub-standard landlord”.
What should you do to prepare?
Landlords should consider whether any steps need to be taken in respect of their properties before 1 April 2020.
- If the tenancy started before 1 April 2018 and will continue until at least 1 April 2020, you have until 1 April 2020 to improve the rating to at least an “E” or register an exemption.
- If the tenancy started before 1 April 2018 but you will enter a new tenancy before 1 April 2020, you need to improve the rating to at least an “E”, or register an exemption, before you grant the new tenancy or renew the existing tenancy.
- If the tenancy started on or after 1 April 2018 and you haven’t already improved the rating to an “E” you must do this immediately or register an exemption as you are in breach of the MEES Regulations.
Please note, you will never be required to spend more than £3,500 (including VAT) on energy efficiency improvements. If you cannot increase the rating to an “E” within this amount or less, you should make all the improvements you can and then register an “all improvements made” exemption (see below).
Does an exemption apply?
There are various exemptions that may apply, and if one does it should be registered on the PRS Exemptions Register before 1 April 2020 to avoid breaching the MEES Regulations. You should consider if any of the key exemptions below apply (this is not an exhaustive list):-
- “All improvements made” exemption
All improvements have been made up to the costs cap of £3,500 (inc. VAT), but an “E” rating has still not been achieved. This exemption lasts 5 years.
- “High cost” exemption
No improvement can be made as the cheapest recommended measure would exceed £3,500 (inc. VAT). This exemption lasts 5 years.
- “Wall insulation” exemption
The only relevant improvement is wall insulation and you have written advice that this measure would negatively impact the fabric/structure of the building. This exemption lasts 5 years.
- “Property devaluation” exemption
If you have evidence that the required improvements will devalue the property by more than 5% (i.e. independent surveyor report), this exemption may apply. This exemption lasts 5 years.
- “Third party consent” exemption
If the relevant improvements require third party consent (such as consent from a head landlord, tenant, planning department or a mortgagee) and despite best efforts the consent cannot be obtained, this shall apply. This exemption lasts 5 years, or where tenant consent is the issue, until that tenancy ends.
- “Temporary” exemption
If you have recently become a landlord under certain circumstances, immediate action is not required and a 6 month exemption can be applied for from the date you become landlord. Once expired, you must have either improved the rating to “E” or above, or register another valid exemption.
Once the exemption has expired, you will need to review what steps you need to take before re-registering the exemption (for example, you may need an updated surveyor report or be able to undertake the required works?).
Are you compliant?
Make it a priority to use the next few weeks to ensure that your domestic private rented properties will be compliant come 1 April 2020.
