Elephants, Emus and an Energy Performance Certificate

Commercial Property solicitor, Harriet Thornton gives an overview of the new obligations for landlords in relation to Energy Performance Certificates .

Recently more than ten million of the nation's population (or thereabouts) tuned in to watch Planet Earth II. I myself was one of those ten million people. Now I have to admit that I am not the biggest naturalist but I do try my best to recycle and do my bit for Mother Earth. I certainly am not at the stage where I am ready to take part in the Good Life and build my own house from horse manure and bales of straw (something which I recently witnessed on Grand Designs) but I must say that upon gazing at some of the wonders which Sir David Attenborough had caught on camera it really brought home to me how I, and indeed all of us, should do a little here and there to help protect this planet.

Perhaps the Government too are avid fans of Planet Earth and maybe the images of a Sloth swimming to find his mate or the Bower Bird collecting trinkets to decorate his nest spurred them on to do that little bit extra for our planet, because updated environmental legislation is set to come into effect which all tenants and landlords should be aware of.

At present it is a legal requirement for properties to have an energy performance certificate or EPC if a property is sold or rented. Until now however there were no obligations on landlords or tenants to do anything with it. It was a reference tool showing how energy efficient the property was. Soon however, greater obligations will be placed on Landlords and tenants to make their properties more energy efficient.

The New Law
Under the Minimum Energy Efficiency Standards (MEES) the following obligations will be imposed;

The ability for a tenant of a domestic privately rented property to request the landlord's consent to the tenant making energy efficient improvements to the property despite restrictions on making improvements in the lease. Such consent is not to be unreasonably withheld. The tenant can make the request on or after 1 April 2016.

A requirement that the Landlord ensures their rented property meets the minimum energy efficiency standards, failing which the Landlord may not:

• Grant a new tenancy, extend or renew an existing tenancy of a domestic or non-domestic privately rented property on or after 1 April 2018;
• Continue to let a domestic privately rented property on or after 1 April 2020; or
• Continue to let a non-domestic privately rented property on or after 1 April 2023.

The minimum standards are properties where the valid Energy Performance Certificate is below band E. Anything lower than that and the property is deemed to fall below the minimum level of energy efficiency.

Relevant Energy Efficiency Improvements
A Landlord who wishes to let a sub-standard property must undertake "relevant energy efficiency" improvements. If the Landlord pays for these works itself, it is possible to recover the cost of these by charging the tenant a higher rent or service charge, providing your lease permits this. If you, as Landlord, do not have the necessary funds to carry out the works, then you may wish to use Green Deal finance. The advantage of this method is that the repayments fall on the bill payer which will often be the occupying tenant rather than the landlord.

Exemptions
There are a number of exceptions which the Landlord can exercise, for instance the consent exemption. This is available if, within the preceding five years, a landlord has been unable to increase the EPC to band E as a result of the tenant refusing to consent to any relevant energy efficiency improvement or, despite reasonable efforts by the Landlord to obtain third party consents, these have been refused or granted subject to a condition with which the Landlord cannot reasonably comply.

There is also the devaluation exemption where the Landlord can obtain a report from an independent surveyor which states that making the relevant EPC improvements would result in a reduction of more than 5% in the market value of the property.

The Temporary exemptions will only apply in very specific circumstances.

Penalties for non-compliance
The penalties for letting a sub-standard property will range from a financial penalty of £2,000 up to £150,000 therefore breaching these regulations can be a costly affair!

So whilst the Elephants and the Emus can breath a slight sigh of relief in the knowledge that environmental issues are being addressed by our government, landlord's and tenants need to make sure that they are fully up to speed on the latest developments in this area of law, otherwise they may find themselves subject to financial penalties or worse, being left with a property which they are unable to let.

This article was written by Commercial Property solicitor Harriet Thornton.

Harriet specialises in leasehold enfranchisement.

For information on extending your lease or buying the freehold contact Harriet on 01274 386 597 or ku.oc1714719930.fcl@1714719930notnr1714719930ohth1714719930