As part of the UK Government’s overarching objective of reducing carbon and greenhouse gas emissions, the Energy Act 2011 established a framework that requires the Government to improve the energy efficiency of buildings in the privately rented sector.
Draft legislation has been proposed, the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, which if enacted, will apply to all eligible leases of commercial premises in the sector.
The key dates and requirements are
- From 1 April 2018, all properties will be required to have at least an “E” Energy Performance Certificate (EPC) rating upon the grant of a lease by a landlord to a new or existing tenant. This requirement is in line with the residential sector.
- From 1 April 2023, all privately rented properties with an EPC must have at least an “E” EPC rating. This includes properties where a lease is already in place and an existing tenant is in occupation of premises.
For Landlords, this will mean that from 1 April 2018, it will be unlawful to assign, let or sublet any property which falls below the minimum energy efficiency standards. This means that landlords can no longer ignore energy efficiency standards and properties will need to meet, or be improved to meet the minimum ratings. Later from 1 April 2023, Landlords may find that their property’s marketability may reduce unless the property meets the minimum energy efficiency ratings.
Similarly, for Tenants; from 1 April 2018, they will not be able to assign or underlet a property, if the property does not satisfy the minimum energy efficiency standards. It will be unlawful to sublet or assign if the property does not comply with the specified energy ratings. At the end of the term of a lease, a landlord is likely to require that a property is handed back above the minimum energy efficiency standards. This could be a potential trap for tenants as reinstatement could involve converting a property or modifying the building services and systems which may impact on the energy efficiency rating of the property.
There are penalties for non-compliance, such as rental of a non-compliant property for 3 months or more is the greater of £10,000 and 20% of the rateable value of the property, with a maximum penalty of £150,000 and publication of details of the breach.
As the recently introduced The Energy Savings Opportunity Scheme Regulations 2014 have proved, energy efficiency legislation ia a complex and evolving area of law.
These draft Regulations should be welcomed as an opportunity to improve the energy efficiency of existing buildings, where until now some landlords have been reluctant to pay for improvements, as it is tenants that benefit from the resulting lower energy costs.
A copy of the draft Regulations can be found at here