Big news: some landlords of some properties might have to improve them by 2018

I’ve asked a couple of questions recently about when DECC intends to end the suspense over the commitment they made in the Energy Act before last (the Energy Act 2011). This commitment requires landlords of private rented properties to bring their houses up to scratch, as far as energy efficiency is concerned, or risk not being able to let them after 2018. Now I was on the 2011 Energy Bill Committee and naively, thought that this would be fairly simple to make happen. So simple, in fact, that, along with some other colleagues in the Bill Committee, I proposed an amendment pulling the date for compliance forward to 2016.

In the end, it was 2018 that made it into the legislation. And the Act states that, some time before 2018, ‘the Secretary of State must make regulations’ setting out how landlords of properties ‘in relation to which there is an energy performance certificate (EPC)’ must get their properties fit for letting by 2018. No level of efficiency is mentioned in the Act, but the talk at the time was that the expected EPC level to be attained would be the not exactly stunning level of ‘E’ or above. But nevertheless, capturing a swathe of properties which are notoriously poorly insulated and which are statistically disproportionately inhabited by people in fuel poverty would be a real step forward.

And then…silence.

At the last DECC questions before the recess, I was very pleased to hear my colleague, Jonathan Reynolds, receive a clear commitment from the Minister, Greg Barker, that DECC will definitely be consulting on the matter this summer. Just …er…two years and eight months after the Act became law.

So that’s all fine then (I’ve noticed that I keep using this phrase as an irritating stylistic device in a number of blog entries over event months…). Well not exactly (and I’ve noticed myself adding this even more irritating rejoinder on numerous occasions. In my defence, there is a clear ‘not exactly’ in this story, so it will have to do. I promise not to do it again though).

The ‘not exactly’ here is that, when the original clause went into the Bill, the Minister guiding it through (yes it’s our old friend Greg Barker again) seemed pretty certain that it applied to all rented property and all landlords. And I am afraid to say, the committee did not then examine the issue much further. But in fact, if you read the legislation fairly carefully, it doesn’t appear to apply to the whole sector.

Basically, the Act refers to ‘the property’ of the landlord throughout the clauses dealing with the 2018 requirement. What that means, it appears, is that a landlord who is renting out a ‘property’ will have to have to produce an EPC for that ‘property’ at an ‘E’ rating or above before he can let it out after 2018.

But, as may have been spotted by many people who rent such properties, landlords very often do not let out ‘a property’; they will let out rooms in a property, perhaps at different times. Something like 14,000 such properties – so-called houses in multiple occupation – in my city, Southampton, are let out in this way. On the face of it and as matters stand, it looks like a high proportion of ‘properties’ will simply be exempt from the requirement for this reason.

I did move a ‘ten minute rule‘ Bill a while ago to try to plug this gap with some simple wording to make the intention of the Act plain but unfortunately it went the way of all such Bills. So it’s now all down to the consultation, which is what the very same Minister told me in response to one of my questions (this is where we started at) which asked about whether the regulations would seek to include HMO landlords in the Act or not.

So I guess we will have to wait and see. I understand that nice Mr. Pickles over at DCLG is not keen at all on any regulations being laid, let alone any that include HMO landlords, so I’ m sure Greg will need all his legendary courage and fortitude to ensure this happens.

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4 thoughts on “Big news: some landlords of some properties might have to improve them by 2018

  1. HMOs are covered in differing Legislation, and are covered under the housing act, 5-7 rooms etc, (HHSRS). The consultation on the regulation for 2016-18 will be issued by DECC sooooooon? It will be down to LAs to determine if they are willing to accept properties below a certain level.

  2. Whilst there is no single organisation representing all private sector landlords, there are several throughly responsible landlords’ associations around. And I am not aware of any which are overtly opposing the inclusions of HMOs within this long-anticipated scheme.Were he to be seeking to block this extension, it is difficult to know quite in whose interests Eric Pickles could claim to be acting.

  3. Energy efficiency is so important, as the more efficient use of energy throughout our country results in less money spent on energy by homeowners, schools, government agencies, businesses, and industries.Let’s hope the Act refers to ‘the property’ of the landlord throughout the clauses dealing with the 2018 requirement and it is actually put into practise, ensuring all homes are at a responsible level.

    • Cara- The text below is my column in the July issue of Energy in Buildings & Industry magazine, on precisely this matter:

      Ever since 2008, it has been illegal to rent or lease outbuilding without providing the occupier with an Energy Performance Certificate, together with a detailed energy improvement survey. Shortly, nobody will be able to rent or lease out any building with worse than an EPC rating of E or above.

      In any Scotland, from this September you won’t be able even to sell such a gas-guzzling large (over 1,000 sq.m) buildings.

      Cause for celebration? Not unless those charged with ensuring compliance start enforcing the law rather better than they have been doing to date.

      What alerted me to the serious limitations of the new policy was a formal briefing note prepared on these new requirements, prepared by the international law firm Eversheds.

      It begins, as ever, with a list of the key exemptions where a property with an F or G energy rating might still be let.

      For residential buildings, the regulations had initially been drawn up saying that landlords need only make improvements at “no upfront costs” to themselves. The demise of Green Deal Finance rather put paid to such a restriction.

      Instead Ministers are considering amending the regulations to provide a simple cost cap for measures (possibly £5,000 per home). Far from onerous: research by Parity Projects confirms that the average cost of bringing F and G properties up to Band E is only £1,421, with more than 70% of properties able to reach Band E for less than £1,000.

      For non-residential buildings, opt-outs include where all cost effective improvements, being works that would pay for themselves through energy savings within seven years, had been undertaken. Another concession is where an independent surveyor has determined that the energy efficiency improvements would devalue the property by more than 5%.

      But the most devastating opt-out of the lot is simply stated. It says:

      “If a property does not have an energy performance certificate (“an EPC”), then the regulations will not apply to it.”

      Effectively, this means that if a landlord is already failing to comply with the initial legislation, to offer a current energy rating to a new tenant, then there is no need to bother with any thought about ever upgrading it.

      This matters. A lot. Whereas in 95% of cases when residential properties are sold, a current EPC features within the transaction process, the figure for EPCs being offered to potential lessees is far lower.

      According to Government estimates obtained via Freedom of Information procedures, just 26% of tenants are ever informed about the energy rating of the property they are about to inhabit. The rest are told nothing official about the likely size of their fuel bills.

      The figures for compliance with non-residential leases is a bit better – but still only 48% of all transactions comply (again, information acquired via FoI requests).

      So what this innocuous sounding opt-out achieves is that these new no F or G energy standards will not be applied in at least half of all commercial lettings. And in only one-quarter of new residential tenancies.

      Whilst there is no empirical evidence one way or the other, it might be logical to assume that a landlord, who deliberately fails to provide a prospective tenant of such basic legally–required information like an EPC, might also be rather more cavalier than most about minimising how much energy the building wastes.

      To my knowledge, no landlord has ever been prosecuted by any local authority for failing to provide an EPC. Acknowledging this, from September the Scottish government is ensuring that each local authority will have a new formal duty to enforce the regulations, and to impose a fixed penalty of £1,000 for failure to produce an EPC (and a further £1,000 for failure to implement subsequent recommendations swiftly).

      I am assured that strenuous efforts will be made to ensure that Scottish councils do carry out both these duties. Awareness that those who try to cheat will be penalised, rather than ignored, should do wonders pour encourager les autres.

      By the time the new scheme is introduced, the UK will have a new Prime Minister, doubtless full of reforming zeal. Just as is happening in Scotland, she should make it obligatory for all landlords to obey the laws of the land to help tenants enjoy lower fuel bills. Rather than leaving it as an option that only a virtuous minority ever bother to comply with.

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