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Energy Act - Implications for landlords?

Posted on 2015-05-20

Energy efficiency in rental property is set to become more important in the coming years due to two pieces of legislation that fall under The Energy Act 2011.

Firstly, as of April 2016, tenants will have the right to ask their landlord to make their rental property easier and cheaper to keep warm if the property does not meet the energy efficiency standard (an Energy Performance Certificate (EPC) rating of band E- or higher).

The second piece of legislation, due to come into force from April 2018, will require all landlords to ensure that their rental property has an EPC rating of band E- or higher.

These changes have been deemed by many as an extremely important step forward in the battle against poorly-insulated and energy inefficient housing in the UK.

The Guardian has reported that the new regulations are expected to help in excess of a million tenants who currently pay more than the average annual energy bill (£1,265).

The overarching message is that landlords must act now if their property is not up to scratch, but that there is still time to get it right before the legislation officially comes into action.

Next year’s piece of legislation - allowing a tenant to request a more efficient home if their property is F- or G- rated – could see landlords faced with a penalty notice if they fail to comply.

“Landlords won’t be able to refuse a reasonable request by a tenant to carry out relevant works, so may well find themselves facing energy efficiency improvements sooner than they first thought. The courts will be able to compel landlords to carry out the necessary works, or face financial penalties as a result of non-compliance,” confirms Rachel Haymes, a property law expert from Ratio Law.

Additionally, from April 2018 it will be illegal for landlords to let out any F- and G- rated properties; the government has estimated that this is set to affect one in ten private sector rental properties, equating to roughly 400,000. What’s more, rental sector energy provider Spark Energy estimates that around 6% of privately rented homes are currently G-rated, the lowest possible energy efficiency rating. According to research, the average cost of upgrading a property’s EPC to an E- rating is around the £9,000 mark.

So it seems that while not the majority, there will still be a high number of UK landlords who need to up the energy efficiency of their property to avoid falling foul of the new laws.

There are a variety of ways to increase a property’s energy performance rating, the most common of which are cavity and loft insulation, use of smart meters, solid wall insulation, use of energy efficient lighting, draught-proofing, hot water system insulation and floor insulation. There is some useful advice and information courtesy of the Energy Saving Trust here.

There are also ways in which landlords can secure funding to help carry out these upgrades. The most well-known of these is The Green Deal. This government initiative helps property owners to make energy saving improvements without having to pay for all the costs up front. Typically, the repayments form part of the electricity bill for the property. As tenants usually pay the utility bills, these costs are therefore absorbed. It must be noted, however, that the landlord has to seek the tenant’s permission to make improvements under the scheme.

At a time when the whole of the UK starts to think about greener housing, this legislation presents an opportunity for all landlords to make sure their properties are truly energy efficient. As well as improving the quality of living for tenants, making a rental property more energy efficient will also increase its value in the long-term.

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