How Will Energy Efficiency Requirements Impact on Letting Your Property?
The Scottish Government’s currently running a consultation on minimum energy efficiency ratings for let property. At worst, this could remove some properties from the rental market entirely. While Simply Let endorses the broad aim of reducing carbon consumption and reducing heating costs, we’re not sure the Government’s really grasping the likely effects on older properties, particularly older rural properties. Neither do we think that their assessments of likley cost are realistic.
The proposal is that if your property has an EPC rating in bands F or G, it will be unlawful for you to offer it for let unless measures are taken to raise the rating, initially to band E (on the first change of tenancy after April 2019) and subsequently to Band D (on the first change of tenancy after April 2022). As proposed, the requirement will be triggered only on a change of tenancy, but there’s also a backstop date on 2025 by which all rental properties would need to meet the higher standard. In recognition of the potential costs to landlords, an expenditure cap of £5000 is proposed. In other words if the cost of recommended improvement measures exceeds £5000, then expenditure of that amount on recommended measures will be sufficient to deem a property compliant even if it doesn't reach Band D.
There’s a lot more detail in the consultation paper and this summary is just that – an indication of the main proposals. It’s worth mentioning the new concept of a “Minimum Standards Assessment” which owners of properties in Bands F and G would require to have carried out as a first stage of working towards compliance. This would be a detailed assessment of the property by a qualified energy assessor with detailed knowledge of building construction and with an understanding of the techniques involved in undertaking energy saving measures, so as to be able to prescribe specific measures appropriate to and practicable for an individual property. This, presumably, is in recognition of the fact that EPCs are generic and the measures they recommend are based on assumptions.
But meeting the higher standard is likely to require substantial expenditure. Enhancing loft insulation and installing low energy lighting will hardly scratch the surface. It’s likely that poorly performing properties will need wall and floor insulation and/or a new heating system – the former not always practicable and options for the latter restricted in rural areas. Currently many rural tenants accept high heating costs (electricity or oil) because the rent is affordable, and rural landlords are content with a moderate rent to keep properties used and heated. But if the cost of compliance can’t be justified by a commensurate rent increase because that’s unaffordable for rural tenants, where does that leave rural non-compliant landlords? Sale, and removal from the rental market? Abandonment?
I’m now aware from a recent discussion on this consultation with a rural agent, that considerable numbers of rural landlords are unaware of the energy rating of their let properties because many are let on long lets and so there have been no changes of tenancy to trigger the EPC requirement.
If your property's in EPC Bands F or G then this will impact upon you. If that's the case, or if you're compliant but feel you want to influence the outcome, we suggest you respond to the consultation, which can be accessed here. It's open for responses until 30 June. Unusually, and rather confusingly, the consultation has two parts – the first dealing with the enhanced minimum energy rating proposals referred to above, and the second dealing with harmonising maintenance standards across the private and social rented sectors and introducing additional safety elements to private landlords’ obligations. Most of these seem sensible (but not all in our view). As they’re likely to impact upon all landlords it’s worth taking time to look at them and respond.