From 1 April 2019, landlords of cold homes in England and Wales will have to pay up to £3,500 (inc. VAT) to improve the insulation and / or heating of property before they can rent it out to new tenants or issue a renewal of an existing tenancy agreement.
Specifically, the new Minimum Energy Efficiency Standard (MEES) regulations apply to any privately rented home banded F or G (the bottom two bandings) on an Energy Performance Certificate.
The MEES Regulations requiring landlords of F and G banded homes to make improvements have actually been in place since last year. But it’s only now that the government has introduced the minimum investment requirement of £3,500 – before this, landlords only had to try to meet the standard if grant money was available.
The regulations will be tightened even further next year. As things stand, landlords only have to make improvements to cold homes before new tenants move in or on tenancy renewal/extension. From next year (1 April 2020) landlords will have to make changes to F&G banded homes even where tenants are staying in place.
You can find more guidance around the new regulations on the government website.
Cold homes in the private rented sector
The private rented sector has the largest proportion of the most energy inefficient homes (6.3% are F and G rated properties, compared to around 0.7% of social housing). Nearly half (45.7%) of households living in such properties are in fuel poverty.
Improving the energy efficiency of private rented homes will not only improve comfort and reduce energy bills but will reduce ill health. National Energy Action estimates that 10,000 deaths each year are attributable to living in a cold home, similar to the number of people who die from breast or prostate cancer each year. Moreover, work undertaken by the Building Research Establishment (BRE) highlights that cold-related illnesses from privately rented F and G rated properties costs the NHS £35million per year.
It has not proved easy to tackle this issue, as it is landlords who are responsible for investing in improvement measures, while it is the tenant who benefits from the resulting reductions in fuel bills.
What do the new regulations mean for landlords?
All landlords should ensure that all potential tenants see a full copy of the Energy Performance Certificate before they agree to rent a property. This is a legal requirement and landlords can be, and are, fined for not doing this. The EPC is produced by an expert home energy assessor but there’s no need to get a new Certificate produced every time you re-let the property as the certificates have a validity of ten years. Nonetheless you should think about getting a new EPC produced if you’ve made a significant energy efficiency improvements (a new boiler, insulation, double glazing etc) as a home with a higher EPC rating will be more attractive to tenants.
Certainly, if you have a private rented property currently rated F or G and have made energy efficiency improvements since the EPC was produced, you should get a new certificate, so that you are not affected by the MEES regulations.
Under the MEES regulations, when properties are rated below “E” on the Energy Performance Certificate, landlords will need to invest up to £3,500 inc VAT to get them to the required standard before re-letting them.
Examples of improvement measures include installing floor insulation, low energy lighting, increasing loft insulation, or changing to a more efficient heating systems. The Residential Landlords Association indicates the average cost to improve an F or G rated property to a band E is expected to be around £1,200.
Some homes will need more than £3,500 to bring them up to an E standard. In that case, landlords who can prove they’ve got as far as they can with energy improvements within that cap, can still rent out the property, even with an F or G banding. And there are some other grounds for exemption from the MEES requirements, including for new landlords (in their first six months of operation) and where energy efficiency measures will damage the home or its value.
In these case the landlord will needs to register an official exemption. In most cases the exemption will last for five years. (any F and G banded home listed on the PRS Exemptions Register under the more generous MEES rules in place last year, on the basis of the costs of making improvements, will have to re-register under the new rules by April 2020).
Where possible, Energy Saving Trust advises landlords to go at least to an E standard and not to be bound by the £3,500 limit on investment. The government is likely to increase the minimum standard incrementally from E, to D, then C in the future. Undertaking a single whole house retrofit, tackling insulation, windows and heating system to get a cold property to a D or C standard in one go is likely to be cheaper than a series of upgrades.
We’ve got more advice on improving your property.
What will this mean for tenants?
Landlords must disclose the energy rating of the property when they advertise it, and they must show the full Energy Performance Certificate to potential tenants at a viewing. If the certificate isn’t offered at this stage, tenants should ask the estate agent to supply it.
Tenants should make sure to check the EPC rating before agreeing to rent a home and be cautious if a property is F or G banded.
Tenants already in a rented home, who have never seen, or do not currently have the Energy Performance Certificate, should ask their landlord or managing agent to provide it. If they then discover they are in an F or G banded home, they should speak to their landlord about what steps will be taken to ensure it is improved by April 2020.
If no action is taken to improve an F or G rated home, the Council should be able to help. Under housing health and safety rules they are obliged to help tenants in dangerously cold homes. The council can order landlords to make energy saving improvements. Before going down this road, tenants should discuss the communication the council will have with the landlord. Unfortunately, it is still sometimes possible for landlords to evict tenants who ‘cause problems’ in this situation.
Energy Saving Trust welcomes the new regulations and supports the government in its ambition to raise the standard further to a ‘D’ rating by 2025 and a ‘C’ rating by 2030.
‘D’ by 2025 is already required in Scotland and the Scottish Government is consulting on an additional target of ‘C’ by 2030.