1st April 2019 saw the introduction of the significantly amended Minimum Energy Efficiency Standards (MEES) for private sector landlords. These provisions have been delayed several times and fudged around a fair bit along the way. These regulations are made pursuant to powers granted by Chapter 2, Energy Act 2011. The regulations were originally made by the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, amended by the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2016 and finally amended again by the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019. It sometimes seems that when it comes to energy efficiency in the PRS that there is an unwritten rule that the regulations should be amended as often as possible to sow the maximum level of confusion.
In summary, the new rules prohibit the letting of properties to tenants in the private sector that do not meet the required standard of having an EPC rating of at least an E. Therefore, properties with F and G ratings will not, in ordinary circumstances be lettable. In truth that limit has been around since 1 April 2018 but it was not very effective before.
Not all tenancies are covered. The provisions only apply to:
- Assured (and assured shorthold) tenancies under the Housing Act 1988; or
Tenancies under the Rent Act 1977;
In addition, the Energy Efficiency (Domestic Private Rented Property) Order 2015 added:
- Assured agricultural occupancies under the Housing Act 1988; and
Tenancies and occupancies covered by the Rent (Agriculture) Act 1976.
So licensees are not covered by these provisions and neither are tenancies which fall outside the relevant statutes for whatever reason.
The provisions will apply to any new tenancy that falls within the terms of the regulations and which is granted after 1 April 2019. It will also apply to existing tenancies from the time that they are renewed or extended. As an Assured tenancy is deemed to be renewed at the point that it becomes statutory periodic then this will mean that once the fixed terms of those tenancies expires the prohibition will apply to them as well.
From 1 April 2020 the provisions will apply to all tenancies that are not already within the scheme.
In addition, the rules will not apply to properties that are not required to have an EPC for some reasons (eg. some HMO property) and if an EPC has been obtained for the property in error (called a voluntary EPC in the guidance) then while the EPC must be supplied on marketing the energy efficiency limits will not apply.
There are a range of exemptions. In fact the minimum standard actually came into force in 2018 but the exemption was very wide because landlords could not be asked to do anything that cost them money. As the government had effectively got rid of the loan schemes offered under the Green Deal this essentially meant a landlord was only really obliged to carry out improvements if they were paid for by an ECO scheme or was obliged to permit a tenant to do the work at the tenant’s cost. This has all changed.
Essentially, the old principle of “no cost to landlord” has been replaced by a cost cap. A landlord will have to do works up to the value of the cap and then will not be obliged to do anything more, even if the property has not reached the required energy efficiency standard. The cap is reduced by the sum of any money spent by the landlord on energy efficiency improvements since 1 October 2017. If the landlord is able to obtain improvements at no cost to themselves through a scheme (such as ECO) then this is also deducted from the cap so the total spend on the property is only up to the cap, even if the landlord has spent little or nothing themselves. Where works cost more than the cap the landlord is obliged to do what they can up to the cap. If it is a single piece of work that costs more than the cap then no work need be done.
The exact figure of the cap was argue over a great deal. The government put forward figures £2,500, £5,000 and £10,000 in consultation. Not very surprisingly, organisations plumped for one end or the other of that range depending on where they stood in the sector. Typically, the government then picked a totally different number and set a cap of £3,500.
There is a separate and important exemption for landlords whose tenant will not permit them to carry out works or who need the consent of a third party and cannot get it. That exemption lasts for five years except, if it is based on a tenant’s refusal, it only lasts until the tenancy ends.
There are further exemptions (again for five years) where no improvements are possible (so there is nothing recommended on the EPC) or all of the recommendations have been carried out and the property remains below an E. There is also an exemption where the improvements would devalue the property.
Finally, there is a temporary exemption of 6 months for new landlords.
Simply having an exemption is not enough. That exemption should be registered and it does not actually apply unless that has been done. Landlords who were relying on the no cost to landlord exemption should already have been registering this and if they have done so they can rely on it until April 2020. If they have not done so then it is too late and the exemption is gone and the cap will now apply.
For all exemptions the registration process is online through the PRS Exemptions Register. Perversely this site is marked as being in Beta but I am told this only changes when enough people have used it so that there is confidence that it is functioning as intended. Alternatively, the government could test software properly before unleashing it on an unsuspecting public!
When registering an exemption evidence is needed. For the cap limit exemption that will be three quotes all showing that the cost is over the cap and for the consent exemption relevant correspondence. This must all be uploaded to the site.
Enforcement is by way of local authority trading standards who clearly have plenty of free time available to deal with this! As a result enforcement is likely to be patchy at best. Enforcement is by way of the increasingly popular civil penalty notice with a maximum of £2,000, or £4,000 if the breach has exceeded three months. Offenders will also have their details published on the PRS Exemptions Register. Appeals are to the First Tier Tribunal.
There is no enforcement route for tenants.
As I have probably made clear already I suspect that the quality of this change will depend on the quality of enforcement which is likely to be spotty. In addition, it is pretty easy to evade the regulations by obtaining quotes which are over £3,500 and it may be hard to show that these are a sham unless they are patently ridiculous. There is also the vexed question of what counts as a single piece of work. Is double-glazing a house a single piece of work or should each window be considered separately? If it is the former, then it is unlikely that most houses will fall within the cap figure whereas if it is the latter then tenants will get at least some double glazing. In practice, the entire exercise is arguably nugatory as EHOs can enforce against cold properties under the HHSRS. Except that this activity is also underfunded and therefore equally patchy!
*In case you are wondering the line that I ripped off for the title was actually “I hate those meeces to pieces” and was regularly uttered by the cartoon cat, Mr Jinks. Also (again in case you were wondering), my wife thinks I am very sad.