WHAT IS AN ENERGY PERFORMANCE CERTIFICATE?

The Government is complying with the Energy Performance of Building Directive (EPBD) with the introduction of the Energy Performance Certificates. Following an Energy Performance Assessment, the EPC shows a record of the energy efficiency levels and CO2 emissions of a building by using a standard table from A to G (A being very efficient, G being very inefficient).

Firstly, the energy survey is performed by a qualified energy assessor who visits the property and examines key items within the premises such as loft insulation, boiler, hot water tank, radiators, windows for double glazing, etc. Once this information is obtained it is then placed into a software program which carries out and calculates the level of energy efficiency and CO2 emissions.

This program then proceeds to generate the level of energy efficiency in the property, with a recommendation report on the ways to improve the energy ratings by using cost effective and low and zero carbon generated systems. This will help improve your energy levels and ensure future savings on fuel costs.

EPC RATINGS, REPORTS AND CERTIFICATES EXPLAINED

If you’re selling or renting your home out, you need to make sure your home has an energy performance certificate (EPC) and EPC rating.

How much energy does your home use? Is it energy efficient? Are you eligible for certain benefit owing to a greener lifestyle?

These are the sorts of questions an energy performance certificate, or EPC, is there to answer. An EPC gives you a score relating to how much carbon you generate.  By law, all buildings that have been newly built, sold or rented out need an Energy Performance Certificate.

Likewise, if you’re buying or renting a property, you need to make sure you look at the Energy Performance Certificate. The EPC, which is valid for 10 years, will give you an idea of how expensive the property will be to run, in terms of your gas and electricity bills.

It’s good to know as much as possible about your new home’s energy efficiency before you move in – it will give you a good idea the amount of money you might need to spend on the house in future, whether it’s on energy-efficient measures or on your energy bills.

CHANGES TO EPC

As from the 1st April 2018 there is 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 came into force for new lets and renewals of tenancies with effect from 1st April 2018 and will for all existing tenancies on 1st April 2020. It is 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 summarises 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.

SCOPE

The Regulations apply to domestic private rented sector properties in England and Wales. This means –

• Properties let under an assured tenancy or a shorthold.
• A tenancy which is a regulated tenancy for the purposes of the Rent Acts.
• Properties let
  (a) On a tenancy which is an assured agricultural occupancy
  (b) On a protected tenancy under the Rent Act 1976
  (c) On a statutory tenancy under that Act.

Properties within scope will include any domestic privately rented property which: has an EPC, and is either (i) required to have an EPC; or (ii) is within a larger unit which itself is required to have an EPC, either at point of sale, or point of let. No changes are made to existing regulations regarding the provision of EPCs.

• Flats and houses are subject to the regulations. In the case of flats this means self-contained unit. Non self-contained units such as bedsits do not require an individual EPC.
• If a bedsit is within a property that does have an EPC, then the Regulations will need to be complied with before the bedsit can be rented out. Although as such bedsits do not need an EPC if the house containing the bedsit has been sold for example it will have an EPC in which case the Regulations will apply.

EXCLUSIONS FROM SCOPE

The following domestic buildings are excluded from the scope of the requirements:

• Buildings and monuments officially protected as part of a designated environment or because of their special architectural historical merit insofar as requirements with certain energy efficiency requirements would unacceptably alter their character or appearance. This includes listed buildings.
• Temporary buildings with a planned timed use of 2 years or less.
• Residential buildings which are intended to be used less than 4 months of the year.
• Stand alone buildings with a total usable floor area of less than 50 square meters.

LISTED BUILDINGS

The extent of the exclusion of listed buildings from the scope of the requirements is unclear. Likewise, in the case of dwellings located within conservation areas. The Regulations state that this exemption is “insofar as compliance with certain minimum energy efficiency requirements which would unacceptably alter their character or appearance”. This exemption is based on a similarly worded exemption from the need to obtain an EPC. Clearly, if a listed building or dwelling within a conservation area does not have an EPC then the Regulations do not apply because only the existence of an EPC triggers the need to comply with the minimum standards. There is a widely held view that all listed buildings are exempt from the need to obtain an EPC, even if they are sold or let out, but, again, the exact scope of this exemption is not clear. The RLA has prepared a more detailed note on this complex subject.

NEED FOR AN EPC

• Properties within scope will include any domestic privately rented property which: has an EPC, and is either (i) required to have an EPC; or (ii) is within a larger unit which itself is required to have an EPC, either at point of sale, or point of let. No changes are made to existing regulations regarding the provision of EPCs.
• Flats and houses are subject to the regulations. In the case of flats this means self-contained unit. Non self-contained units such as bedsits do not require an individual EPC.
• If a property does not have an EPC then the regulations do not apply.

The EPC must be the current EPC if there is one and this must be no more than 10 years old.

PROHIBITION ON LETTING

A domestic private rented sector property is substandard if the EPC rating is F or G, unless an exemption applies. The legislation prohibits a landlord from letting out a substandard property. If there is an EPC in place which shows that the property is an F or G then it must not be let; otherwise the landlord is liable to penalties. This is subject to any available exemptions. Energy efficiency improvements must be carried out to bring the property up to an E rating at the minimum, unless one of the exemptions is applicable. In particular, if the work cannot be carried out so as to meet the Green Deal Golden Rule then there is potentially an exemption. Under the Golden Rule there should be no upfront costs (or any net cost to the landlord) because savings resulting from the works should repay their cost over the expected lifetime of the works.

If a landlord lets and continues to let the property in breach of the regulations, however, the breach does not affect the validity or legality of the tenancy itself, so the rent still continues to be payable.

EXEMPTIONS/RESTRICTIONS ON MAKING IMPROVEMENTS

Only appropriate, permissible and cost-effective improvements are required under the regulations. Landlords will be eligible for an exemption from reaching the minimum standard where they can provide evidence that one of the following applies:

• They have undertaken those improvements that are cost-effective but remain below an E EPC rating. Cost-effective measures are those improvements that are capable of being installed within the Green Deal’s Golden Rule. This ensures that landlords will not face upfront or net costs for the improvement works.
• They are unable to install those improvements that are cost-effective without upfront costs because the funding entails Green Deal Finance, and they or their tenant fail the relevant credit checks.
• The landlord is required by a contractual or legislative obligation to obtain a third party’s consent or permission to undertake relevant improvements relating to the minimum standard, and such consent was denied, or was provided with unreasonable conditions.
• The landlord requires consent, and the occupying tenant withholds that consent.
• Measures required to improve the property are evidenced by a suitably qualified independent surveyor, for example from the Royal Institution of Chartered Surveyors (RICS), as expected to cause a capital devaluation of the property of more than 5%. Only those measures that are expected to cause such devaluation would be exempt from installation.
• There will be no requirement to install wall insulation under the regulations where the landlord has obtained a written opinion, from a suitably qualified person or from the independent installer engaged to install the measure, advising that it is not an appropriate improvement due to its potential negative impact on the fabric or structure of the property (or the building of which it is part).

ENFORCEMENT

• Local authorities enforce compliance with the regulations.
• Where a landlord considers an exemption applies allowing them to let their property below the minimum energy efficiency standard, the landlord will need to provide such evidence to a centralised register, the “PRS Exemptions Register”. Landlords may be required to submit relevant evidence and details of their exemption to the Register. The Government may use this information to assist local authorities in targeting their enforcement activity.

COMPLIANCE NOTICES AND PENALTIES

Where a local authority suspects that a landlord with a property in scope of the regulations is not compliant, or has not sufficiently proved an exemption, the local authority can serve a compliance notice on the landlord requesting further information it considers necessary to confirm compliance. If it is not provided, or is provided and is not sufficient to provide compliance, the local authority may proceed to issuing a penalty notice.

Penalties for a single offence may be cumulative, up to a maximum of £5,000. Further penalties may be awarded for non-compliance with the original penalty notice where a landlord continues to rent out a non-compliant property; however, penalties are cumulative up to a maximum of £5,000. The landlord can be awarded a further penalty when one of the following events occurs:

• The tenant changes
• The regulatory backstop comes into effect

The penalty regime for non compliance with the regulations is as follows:

• Providing false or misleading information to the PRS Exemptions Register  –  Penalty: £1,000 Publication of non compliance
• Failure to comply with a compliance notice from a local authority  –  Penalty: £2,000 Publication of non compliance
• Renting out a non-compliant property  –  Penalty: Less than 3 months non compliance £2,000 fixed penalty Publication of non-compliance  –  3 months or more of non compliance £4,000 fixed penalty Publication of non-compliance

NB: The penalty amounts are fixed and do not vary according to the severity of the contravention.

APPEALS

Landlords may appeal any penalty notice on the basis that the penalty notice was issued in error (error of law or fact), the penalty does not comply with the Regulations, or that it was inappropriate in the circumstances for the penalty notice to have been served. The appeal would be heard at the First Tier Tribunal (General Regulatory Chamber).

IMPROVEMENTS WHICH CAN BE REQUIRED

The following improvements are those which a landlord can carry out and which are eligible to qualify so as to comply with the Minimum Energy Efficiency Standards.

• Mechanical ventilation with heat recovery
• Micro combined heating power
• Micro wind generation
• Pipework insulation
• Photovoltaics
• Chillers
• Gas fired condensing boilers
• Replacement glazing
• Oil fired condensing boilers
• Warm air units
• Radian heating
• Roof insulation
• Warming roof insulation
• Ceiling improvements (including duct ceiling)
• Secondary glazing
• Solar water heating
• Solar blind, shutters and shading devices
• Transpired solar collectors
• Under floor heating
• Under floor insulation
• Variable speed driers for fans and pumps
• Waste water heat recovery devices attached to showers
• Water source heat pumps