New minimum energy efficiency standards (MEES) are coming into force in England and Wales from 1st April 2018. According to Landlord Today over 400,000 properties are still failing to meet current energy performance standards passed in 2015. This translates, according to government figures, as one in 10 rental properties in the UK that could be unlettable, if landlords fail to improve their energy efficiency. Is yours one of them? As a landlord it is your responsibility to assess your property to ensure that you are compliant with the new standards so if you haven’t already done so you need to act now!
Why has the Government introduced the new regulations
As a result of the updated regulations, from 1st April 2018 landlords will be breaking the law if they grant a new lease on properties that have an Energy Performance Certificate (EPC) rating below E, unless the property is registered as an exemption. But why is the Government focusing specifically on landlords?
The Department for Business, Energy and Industrial Strategy states: “EPC F and G rated properties waste energy. They impose unnecessary cost on tenants and the wider economy, and they contribute to avoidable greenhouse gas emissions. Increasing the energy efficiency of our domestic rental stock can help:
- Manage the energy costs of tenants, including some of the most vulnerable;
- Improve the condition of properties and help reduce maintenance costs;
- Smooth seasonal peaks in energy demand, and thereby increase our energy security;
- Reduce greenhouse gas emissions at relatively low cost.
The regulations are intended to ensure that those tenants who most need more efficient homes, particularly vulnerable people, are able to enjoy a much better living environment and lower energy bills.”
They also note that a report published in 2016 by Sustainable Homes on social housing found that improving the energy efficiency of rental housing also positively impacted on landlords by reducing rental arrears and voids. For example, it was found that cold homes, on average each year, had two more weeks of rent arrears when compared to more efficient homes. In addition, as homes become more efficient void periods are also reduced, with 31% fewer voids in band B properties when compared with those of E or F. The new standards are therefore mutually beneficial for both landlords and tenants. Some landlords may seek to pass on the costs of the improvements to tenants by raising the rent. However, our view is by carrying out energy efficiency improvements, landlords are likely to improve the value of their property and enjoy better relationships with tenants – who, in turn, should benefit from energy bill savings.
What are the consequences of failure to comply with the new MEES standards
Local authorities will be able to impose civil penalties if a landlord is found to be letting out a property with a sub-standard EPC rating. Where a landlord has let a sub-standard property for a period of less than three months then the local authority will be able to impose a fine of up to £2,000. If in breach of the regulations for more than three months then a financial penalty of up to £4,000 could be served. This can also include a publication penalty, where details of a landlord’s breach may be published. In addition, landlords who do not have a valid EPC may also be unable to serve a Section 21 notice to gain possession at the end of the tenancy. Another potential cost is the loss of rental income for landlords who are unable to let out a property while it is legally unlettable.
How can Landlords comply with the new MEES standards
For many landlords, only small changes to their property may be needed to ensure that they meet standards. A report published by Parity Projects for the UK Green Building Council suggests that the energy efficiency of a property can often be improved for £2,500 or less. Measures such as improving insulation, attending to window and door seals to eliminate drafts and installing Low-energy LED lighting are all easily implemented.
We can help landlords access grants and funding to help manage the costs of improving the energy efficiency of their properties.
You can find further information in the Government ‘Domestic landlord guidance’ document here.