Friday, 3 March 2017

Energy Efficiency Regulations Looming – New Guidance Issued

With just over a year to go until the Energy Efficiency Regulations* take effect, the government has issued guidance to landlords of non-domestic properties in the private rented sector.

Subject to a few exceptions, from 1 April 2018 it will be unlawful to grant a tenancy to new or existing tenants if the property has an EPC rating of band F or G (shown on a valid Energy Performance Certificate for the property).

From 1 April 2023, landlords must not continue letting a non-domestic property which is already let if that property has an EPC rating of band F or G.

Where a landlord wishes to continue letting property which is currently sub-standard, they will first need to ensure that energy efficiency improvements are made which raise the rating to a minimum of E.

There must be a risk, looking to the future, of even being satisfied with a still-low E rating as those buildings are potentially at risk of some future tightening of the regulations, or “regulation-creep”.

In certain, limited, circumstances landlords may be able to claim an exemption from this prohibition, which includes situations where all improvements which can be made have been made, and the property nevertheless remains below an E.

Where a valid exemption applies, landlords must register it on a database called the PRS Exemptions Register.

Full details of the exemptions and the register are given in the guidance.

Failure to comply with the regulations puts the landlord at risk of enforcement action being taken resulting in a financial penalty.

The regulations don’t apply to properties that are not required to have an EPC (for example some, but not all, listed buildings).

Guidance for domestic properties, also subject to the regulations, is expected soon.

*Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.

UPDATE 14/3/17 - see this excellent summary from Clifford Chance, who have distilled the guidance into 10 key questions for commercial property owners. It includes suggestions for next steps.

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