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Energy Performance Certification

There has been a considerable amount of legislation in recent years which stems from the Energy Performance of Buildings Directive (EPBD) (Directive 2002/91/EC) of the European Parliament and theEuropean Union (EU) dated 16 December 2002. The Climate Act Bill became law on 26th November 2008 and aims to enable the UK to become a low-carbon economy and gives the government powers to introduce the measures necessary to achieve a range of greenhouse gas reduction targets.

The Energy Act 2011 (The Act) covers a wide range of measures; one of the most significant to the property market is a new financing framework called ‘Green Deal’ to enable the provision of fixed improvements to the energy efficiency of households and non-domestic properties, funded by a charge on energy bills that avoids the need for consumers to pay upfront costs. The cost is effectively paid for by the energy savings and so a consumer’s bill remains unchanged by the improvements until the cost of those improvements along with the credit interest accrued has been paid off. If the property is sold or re-let the new bill payer/beneficiary of those improvements, takes over responsibility for continuing to repay any outstanding green deal initiative improvements via their utility bill.

From 1st April 2016 private landlords will not be able to refuse a tenants reasonable request for consent to energy efficiency improvements, where finance package, such as Green Deal and/or the Energy Company Obligation (ECO) are available.

By virtue of The Act, from 1st April 2018, it will not be possible to let commercial (or residential) properties below a stated minimum Energy Rating of E rating in England and Wales. This will have an adverse effect on buildings with poor energy efficiency and these regulations are known as the Minimum Energy Efficiency Standards (MEES). These are summarised as follows:

The minimum energy efficiency standard will be set at an ‘E’ EPC rating;

• The regulations will be enforced upon the granting of a new lease (as well as lease renewals) from 1 April 2018.

• From 1 April 2023, the regulations will apply to all privately rented property in scope of the regulations, including where a lease is already in place and a property is occupied by a tenant.

• The regulations will exclude from this definition any property which is let on a tenancy which is granted for a term of 6 months or less and any property let on a tenancy for 99 years or more.

• All non-domestic property types are in scope of the regulations, except for those specifically excluded from existing Energy Performance Certificate (EPC) obligations, as set out in the EPC regulations, such as Listed buildings.

• The regulations will be applied to sublets.

• Landlords will be given an extension of six months from the date of the grant of the tenancy before they are required to comply with the regulations.

• Where a non-compliant property occupied by a tenant is sold, the new landlord will have six months to improve the property, or seek to demonstrate an exemption applies. Landlords will be exempt from meeting the minimum standard if they can demonstrate one of the following:

  • The identified improvement measures are not cost-effective, either within a seven year payback, orunder the Green Deal’s Golden Rule.
  • Despite reasonable efforts, the landlord cannot obtain necessary consents to install the required energy efficiency improvements, including from tenants, lenders and superior landlords.
  • A relevant suitably qualified expert provides written advice that the measures will reduce a property’s value by 5% or more, or that wall insulation required to improve the property will damage the property.
  • Where a landlord considers an exemption applies allowing them to let their property below an ‘E’ EPC rating, the landlord will need to log this on a centralised register – the “Private Rented Sector (PRS) Exemptions Register”. These exemptions last for five years.