As from the 1st April 2018 there will be a requirement for any properties rented out in the private rented sector to normally have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). The regulations will come into force for new lets and renewals of tenancies with effect from 1st April 2018 and for all existing tenancies on 1st April 2020. It will be unlawful to rent a property which breaches the requirement for a minimum E rating, unless there is an applicable exemption. A civil penalty of up to £4,000 will be imposed for breaches. This guidance summarizes the regulations. There are separate regulations effective from 1st April 2016 under which a tenant can apply for consent to carry out energy efficiency improvements in privately rented properties.
For most landlords this will mean that they will no longer be able to rent out a property with a rating of F or G after April 1st 2018. As such landlords with properties in this EPC bracket should begin preparing now for April 1st. However, there are several nuances and exceptions, which this guide covers in detail.
When energy efficiency improvements are compulsory
Where at any time on or after 1st April 2018 a landlord lets a privately rented property which is F or G rated on a current legally required EPC then energy efficiency improvements must be carried out to bring the property up to at least an E rating before the property is rented out, unless the landlord qualifies for an exemption and the exemption is registered on the Public Exemptions Register.
There several ways in which you will be classed as letting a property for these purposes:
- You grant a new assured tenancy, including a shorthold
- You renew or extend an existing assured tenancy, including a shorthold, by agreement with the tenant. This can be done when you grant a fresh tenancy to the same tenant or simply agree with the tenant that the existing tenancy will be extended
- A statutory periodic tenancy comes into existence following the ending of a fixed term assured tenancy (shorthold or non-shorthold). At that point the law imposes a new tenancy on the parties where the tenant stays after the fixed term has run out. This is treated as a new letting for these purposes
- A new assured tenancy by succession comes into existence when a family member takes over a Rent Act protected tenancy
- A new tenancy is granted to a Rent Act protected tenant of the same or a different property owned by the same landlord
- An agricultural occupancy or similar tenancy is granted, renewed or extended
NB: This note does not deal further with tenancies of agricultural dwellings.
In all the above cases the requirement to carry out energy efficiency improvements for non-compliant properties will arise where the property has a valid current EPC (i.e. no more than 10 years old) and the property is legally required to have an EPC because:
- The property which is being let or has in the past been let
- The property has been sold
- The property has been improved and building regulation requirements meant that an EPC is required
The requirement to have an EPC is not just looked at in respect of the property itself which is being let out. It also applies where there has been a requirement for the building, of which the property being let is part, to also have an EPC. This is particularly relevant to non-self-contained units such as bedsits and the position regarding these is explained below under the Section “Flats and bedsits”.
It should be noted that if the letting is not legally an assured tenancy (shorthold or not) or one of the other tenancy types within the scope of the Regulations then the Minimum Energy Efficiency Standard does not apply. The sections on Assured Tenancies and the Exclusions below explain this issue in more detail.
The Examples below help explain some of these issues.
These rules regarding new tenancies are ongoing from 1st April 2018 onwards but, additionally, as from 1st April 2020 they will apply to continuing tenancies which are already in existence on that date. They will then apply on an ongoing basis to continuing tenancies which have a current EPC, if there is a legal requirement for the property to have an EPC.
From 1st April 2020 the Minimum Energy Efficiency requirement will apply to continuing tenancies where there is a valid current EPC for the property, and an EPC is legally required to be in place. The property must therefore be brought up to the minimum E rating before 1st April 2020 to comply with the Regulations, unless an exemption is available and is claimed by being registered in the Public Exemptions Register. This applies to the following ongoing tenancies:
- Assured tenancies, including a shorthold
- Ongoing Rent Act protected tenancies. In practice, however, this means that it will only apply where the property which is let (or where it is part of a building) then the building (as a whole) has been legally required to have an EPC which is most likely to occur if it has been sold
- Assured agricultural occupancy or similar tenancies relating to agricultural dwellings
Without an EPC rated E or above it will not be possible to issue a new tenancy, or renew an existing tenancy, from 1st April 2018. There are fines of up to £5,000 for landlords that are found in breach of the legislation.