Energy Performance Certificates - They Really Will Matter!

In January this year there was a media frenzy when David Cameron stated that he would refuse to attend the TV debates in the run up to the General Election unless the Green Party were invited to attend.

The increased prominence of the Green Party has reflected a shift in attitudes in recent years towards a more environmental ethos.  Beyond air time for more politicians, what does this altered focus mean for the property world, and particularly for Landlords?

Energy Performance Certificates (EPC) were introduced along with Home Information Packs (HIPs) in 2007. Despite HIPs no longer being required, the need for EPCs has continued for an increasing number of properties.

According to Government statistics, 18% of non-domestic properties currently have an EPC rating of F or G. The Energy Act 2011 required the Secretary of State to enact regulations to improve the energy efficiency of buildings by April 2018. The Energy Efficiency Regulations 2015 will result in it being unlawful to let properties with an EPC rating of below E after April 2018, and to continue to let non-compliant properties after April 2023. There are, however, a number of exceptions to these requirements.

As of 1st April 2018, there will be a restriction on granting a new tenancy, as well as extending or renewing an existing tenancy, where the property is non-compliant. As of 1st April 2023 the restriction will extend to continuing to let a non-compliant property.

In broad terms, the exceptions include:
  • tenancies granted for a term certain of 99 years or more or for a term certain of 6 months or less (provided there is no right to renew or extend beyond 6 months);
  • where all relevant energy efficiency improvements have been made, or no such improvements can be made;
  • despite reasonable efforts, the landlord is unable to obtain a required consent;
  • where making the relevant improvements would devalue the property by more than 5%; and
  • where the lease has been granted in exceptional circumstances.
  • A breach will attract a fine of up to £150,000.00, as well as having the breach published.
Domestic properties will be subject to the same exceptions as non-domestic properties, other than the one relating to lease length.

Additionally, a domestic tenant will have the right to request a landlord’s consent to make the relevant energy efficiency improvements, and a landlord is not allowed to unreasonably refuse.

A breach relating to domestic property will attract a fine of up to £5,000.00, as well as having the breach published.

Our advice at Hughes Paddison is to use this time to either get properties compliant and lettable now, use careful lease drafting to recover costs associated with this, or dispose of expensive and inefficient properties now.