What is the “cost cap” for domestic MEES? When are improvements “too expensive”?

Originally, the idea was that improvements would only have to be made to domestic properties if they could be achieved “at no cost” to the landlord. This policy depended upon various forms of funding being available to landlords to make any necessary improvements.

Following the effective collapse of Green Deal funding and the withdrawal of many grants, the Government launched a consultation in December 2017 to review this policy.  This occurred just before the Energy Efficiency (Private Rented Sector) (England and Wales) Regulations 2015 began to take effect in April 2018 therefore little actual evidence was available about their real impact.

The consultation ran until March 2018 with summary responses being published in July 2018 before the Government responded with new policy in November 2018.  The new policy effectively requires landlords to spend up to £3500 inclusive of VAT (the cost cap) per property after October 2017 in order to bring it up to the Minimum Energy Efficiency Standard (MEES).

A full response is available online:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/753710/Final_PRS_Minimum_Standards_Consultation_Government_Response.pdf

The summary states that, subject to timely Parliamentary approval, the Government intends to amend the regulations and implement them during 2019 as follows:

  1. Introduce a landlord financial contribution amendment with the landlord contribution capped at £3,500 and inclusive of VAT;
  2. Any investment in energy efficiency made since October 2017 to be counted within the cap;
  3. Any available third-party funding, including Green Deal finance and local authority grant funding, to be counted within the cap;
  4. Establish a new ‘high cost’ exemption to be available where a substandard property cannot be improved to E for £3,500 or less, and require the submission of three installer quotes where a landlord is registering such a ‘high cost’ exemption;
  5. Remove the current ‘no cost to the landlord’ provision, and curtail existing ‘no cost’ exemptions so that they will end on a planned date of April 2020;
  6. Remove the consent exemption currently available under Regulation 31(1)(a)(ii) where a tenant has withheld consent to a Green Deal finance plan;
  7. Upon enactment, the amended regulations will apply upon the granting of:
    1. a new tenancy to a new tenant, and,
    2. a new tenancy to an existing tenant.
  8. From 2020, the amended regulations will apply to all privately rented property in scope of the regulations, in line with the existing regulatory ‘backstop’ date.
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