Complying with the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 and MEES can seem more than a little daunting. However, the Department for Business, Energy & Industrial Strategy have simplified the process into a single flow chart to help. Combined with expert advice and support, this chart will help guide landlords through the process required to comply with the regulations.
All exemptions claimed by landlords to improving domestic properties with an EPC rating at F or G must be registered on the PRS Exemptions Register. This is an online process and does not cost anything to complete but you will need to have the correct supporting evidence available when you make your application. In addition to registering exemptions, you can also search for details of exemptions that have already been registered.
To access the PRS Exemption Register visit https://prsregister.beis.gov.uk/
It is very important that you recognise that a single property may be subject to a number of different exemptions that apply to different improvements. An exemption from one improvement does not exempt a landlord from making other relevant improvements.
Additionally, you will need to ensure that you have completed the correct processes and gathered sufficient evidence before registering an exemption. There are significant penalties for registering a false exemption on the PRS Exemptions Register.
The Department for Business, Energy & Industrial Strategy (BEIS) have issued the guidance below regarding the minimum evidence required to support each type of exemption.
|Exemptions Register Information Requirements|
|Information required for all exemptions:|
|Additional Information and Evidence Related to Each Specific Exemption|
|Registering an exemption under the regulation 25(1)(b) exception – where a recommended measure is not a “relevant energy efficiency improvement” because the cost of purchasing and installing it cannot be wholly financed at no cost to the landlord (see Regulation 24(3)):|
Please Note: The government is current consulting with a view to withdrawing this exemption and replacing it with a capped cost.
|Registering an exemption under the regulation 25(1)(a) exception – where all relevant improvements have been made and the property remains below an E:|
|Registering an exemption under the regulation 25(1)(b) exception – where the property is below an E and there are no relevant improvements which can be made:|
|Registering a wall insulation exemption under regulation 24(2):|
|Registering a consent exemption under regulation 31(1):|
Please Note: Where the party who withheld consent was a tenant, the exemption will only remain valid until that tenant’s tenancy ends. When that tenant leaves the property (or after five years, whichever is soonest) the landlord will need to try again to improve the EPC rating of the property, or register another exemption, if applicable.
|Registering a devaluation exemption under regulation 32(1):|
|Registering an exemption upon recently becoming a landlord (regulation 33(1) or (3)):|
Please Note: Where a person wishes to register an exemption upon recently becoming a landlord, the exemption will last for a period of six months.
There is no specific requirement in the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 for a landlord to seek tenant consent to carry out works. However, depending on the terms of the tenancy agreement between a particular tenant and landlord, the landlord may need to obtain tenant consent before undertaking certain works (energy efficiency related or otherwise). Where this requirement already exists, the PRS Regulations recognise that consent should be obtained before work is undertaken. This is considered entirely compatible with the requirement to allow a tenant quiet enjoyment of the property.
Between April 2018 and April 2020 landlords are only required to improve F or G rated properties before signing a new tenancy agreement. In their guidance the government states that they expect “many landlords will make improvements while a property is vacant between tenancies” and that therefore “tenant consent may not be a consideration”.
The guidance issued goes on to consider this area in more detail.
“One issue which landlords should consider is whether or not they have the right to carry out improvement works under the terms of an existing tenancy. Landlord rights of entry to undertake work on a property typically only extends to the carrying out of repairs or maintenance, rather than making ‘improvements’. As a majority of the measures landlords can install to meet the minimum standard will be considered improvements, a landlord may not have an automatic right of entry to install the measure or measures, and tenant consent may be necessary.
“On the other hand, if the tenancy agreement specifically gives the landlord right of entry to undertake ‘improvement works’, tenant consent may not be necessary. In all cases the wording of individual tenancies will dictate what is and is not permissible without consent.”
Additionally, landlords are reminded that they are under an obligation to make reasonable efforts to obtain third party consents and should not behave in such as manner as would discourage third party consent being granted.
“The Regulations require the landlord to make ‘reasonable efforts’ to obtain third party consent. Reasonable efforts may include attempts on a number of separate occasions and using a number of different available means of communication to secure agreement from, for example, a tenant or superior landlord, with evidence to show this had been done (in the case of planning consent refusal, evidence of a single application and subsequent refusal is likely to be sufficient evidence).
“Broadly speaking, it is thought that that it will not be reasonable for the landlord to comply with a condition which may reduce the landlord’s ability to let the property or if it involves unreasonable costs.”
WARNING: Since setting the MEES, the Government has begun a consultation regarding the funding of improvements. Instead of requiring “no cost” to the landlord they are now proposing a monetary cap on the cost of improvements required for each property – see note below.
A Landlord is only required to make improvements to meet the minimum standard if they can do so at no cost to themselves. No cost funding can come from a range of sources including:
- Green Deal Finance,
- ECO help to heat funding,
- Local Authorities home energy efficiency grants,
- any other source not repaid by the landlord,
- any combination of the above.
For general advice and assistance on energy efficiency funding, landlords can contact the Energy Savings Advice Service on 0300 123 1234. For scheme specific information landlords should:
- Green Deal Finance: Search for a local Green Deal Provider (details can be found on the Green Deal Finance Company website www.gdfc.co.uk) or through the enquiry form on the GDFC website;
- ECO help to heat programme: Contact the Energy Savings Advice Service on 0300 123 1234, (where appropriate the landlord may need to ask their tenant to contact ESAS themselves);
- Local Authority funding: Contact their local Authorities for information on any home energy efficiency grants available.
Note: The New BEIS Consultation
On 19th December 2017 the Department of Business, Energy and Industrial Strategy (BEIS) launched a new consultation to amend the regulations. The consultation is due to conclude on 13 March 2018, just a few weeks before the current regulations take effect on 1st April 2018. The consultation states:
“We’re seeking views on the government’s proposal to amend the domestic Minimum Level of Energy Efficiency Regulations to introduce a capped landlord financial contribution element.
“This proposal is designed to future-proof the regulations and make them as effective as possible, while protecting landlords against excessive cost burdens. With a cost-cap, domestic landlords would only need to see investment in improvements to an EPC F or G rated property up to the value of that cap. The government’s preferred cap level is £2,500 per property. A range of additional, alternative, cap options are set out in the consultation and the associated consultation impact assessment.
“The consultation is intended for all interested parties including landlords and tenants, local government, energy suppliers, energy assessors, small and large businesses, consumers, and the general public.”
Further information can be found on the BEIS website on GOV.UK
The guidance issued by the Department for Business, Energy & Industrial Strategy on this subject is very clear. It states:
There are no specified materials or improvement measures; a landlord is free to do whatever they like with their property so long as the EPC rating can be raised to meet the Minimum Energy Efficiency Standard. The most assessable source of advice would be the recommended measures section on EPC for the property, but landlords can seek advice from other suitably qualified experts if they wish.
Holiday lets, together with rooms in hotels and bed & breakfast accommodation are typically let under a licence to occupy, rather than a tenancy. Therefore, this type of rental property is normally outside of the scope of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 and not required to meet the MEES.
If there are any concerns about whether a property is occupied under a licence or a tenancy, and whether the landlord is subject to the Regulations, independent specialist legal advice should be sought.
HMOs are not excluded from the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. The Regulations apply to all privately rented properties that are legally required to have an EPC, and where rooms are let on one of the qualifying types of tenancy (most likely assured tenancies). An HMO will be in scope where it meets these criteria.
However, individual rooms within HMOs are not required to have their own EPC, so a property which is an HMO will only have an EPC if one is required for the property as a whole (typically this will be if the property has been build, sold or rented as a single unit at any time in the past 10 years). If an HMO is legally required to have an EPC, and if it is let on one of the qualifying tenancy types, then it will be required to comply with the minimum level of energy efficiency.
NB: Many HMOs are run on a commercial basis and as such are business premises. Where this is the case they would normally require a non-domestic EPC like a hotel, hostel, care home or student accommodation block rather than a domestic EPC.
The tenancy types that the Minimum Energy Efficiency Standard (MEES) applies to are:
- An assured tenancy (including an assured short hold tenancy) defined in the Housing Act 1988.
- A regulated tenancy defined in the Rent Act 1977.
- An agricultural tenancy as set out in the Energy Efficiency (Domestic Private Rented Property) Order 2015.
The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 only apply to tenancies in the private rented sector. They do not apply to properties owned by councils and social landlords. Similarly, they do not apply to properties occupied under licence without a qualifying tenancy.
Whilst the exemptions are relatively straight forward, applying them is more complex and can also involve understanding the separate regulations that apply to both Energy Performance Certificates and the Minimum Energy Efficiency Standards. There are some organisations suggesting that landlords can easily avoid improving their buildings by claiming an exemption. Our experience is that this is more difficult than it first appears and could easily cost more than improving the building to meet the standards.
Exempt buildings and tenancies
Not all buildings and tenancies fall within The Energy Efficiency (Private Rental Property) (England and Wales) Regulations 2015. The MEES do not apply to:
- Buildings that have not been legally required to have an EPC. These can include some listed buildings (see our specific notes on this topic), temporary properties, some HMOs and holidays lets. It will also apply if the property has not been built, sold, let or significantly altered since the introduction of EPCs.
- Buildings without a valid EPC. This would include buildings where the EPC is over ten years old when it is relied upon for the MEES regulations.
- Buildings only with a voluntary EPC. An EPC may have been lodged for any number of reasons. EPCs completed for purposes other than the construction, sale, let or significant alteration of the building, including those lodged in a mistaken understanding that one was required, are known as voluntary EPCs. A building is only subject to MEES if the EPC was legally required. NB: There is currently no way to tell this from the EPC itself and so you will need to know the history of whether or not the building has legally required an EPC.
- Buildings occupied solely under licence. MEES only applies to buildings occupied under a “Relevant Tenancy”. This includes an assured tenancy, a regulated tenancy and domestic agricultural tenancies. If the occupier is present only under a licence to occupy the MEES requirements will not apply as there is no tenancy.
- Social housing schemes. The regulations apply only to privately rented properties. Social housing is exempt from MEES regardless of its condition, quality, or EPC rating.
Exemptions from making improvements
There are a number of circumstances where an exemption or multiple exemptions from making improvements can be claimed. Where an exemption of this type is claimed, it may be possible to continue to rent out a substandard property. However, all exemptions of this nature must be lodged on the PRS Exemptions Register.
Additionally, it should be noted that specific supporting evidence is required before registering an exemption on the PRS Exemptions Register. We can provide specialist advice in this area as part of our service but would always caution clients that meeting these requirements can cost significantly more than making improvements to meet the MEES. This will obviously depend upon the building and the improvements required but changing a few lights will likely be cheaper than obtaining professional services to prove a property will be devalued for example.
Registered exemptions are also non-transferable. At best they are valid for a maximum of five years but a change in tenant or sale to a new landlord will normally mean the process (and costs involved) will have to be repeated. Only then can new exemptions be registered. There are also significant penalties for making a false or misleading declaration on the PRS Exemptions Register.
The main exemptions from making an improvement are:
- All relevant improvements have been made – Where all the improvements suggested have been made and the property still remains below the MEES.
- Incompatible wall insulation improvements – Where independent experts conclude that it is inappropriate to make the wall insulation improvements suggested as they would have a negative impact on the structure or fabric of the property (or the building of which it is part).
- Improvements which cannot be financed without cost to the landlord – Landlords are not required to make improvements where relevant “no cost” funding is not available. However, they must attempt to take advantage of funding that is available and must be able to demonstrate this. Improvements that do not meet the new “Golden Rule” for Green Deal funding may fall within this exemption but only if alternative funding is not available.
- Devaluation of the property – You are not required to make an improvement where an independent surveyor determines that making it would devalue the property by more then 5% of its current market value.
- Third Party Consent is refused – Where there is a sitting tenant you might complete the formal process required in offering to improve the property and consent may be withheld. Equally, you may require consent from a superior landlord, a bank or building society or the local authority which may be reasonably refused. However, you will have to demonstrate that you have applied for permission and have tried to accommodate any reasonable restrictions that they have placed upon you before you can claim this exemption. This exemption can also be used where planning, conservation or other consents are required from statutory authorities providing it can be demonstrated that these have been applied for and refused.
Please note that every suggested improvement must be considered individually for the purposes of claiming exemptions. It is therefore highly likely that, even where some improvements may be subject to exemptions, others will not. In this situation, some improvements to the building will still need to be made.
There is a lot of confusion about exemptions relating to listed buildings and buildings within a formally designated conservation area. Firstly, the exemptions that exist appear to vary between administrations in the UK and are different for different forms of assessment. Secondly, the supporting guidance, particularly in England & Wales, is regularly updated and can appear inconsistent or incomprehensible.
Air Conditioning Energy Assessments & Display Energy Certificates
Dealing first with these two assessments, the need for compliance is not affected by the historic nature or otherwise of the building. As such, no exemptions from the requirements for these assessments exist specifically for buildings that are listed or in formally designated conservation areas.
Listed buildings and those in formally designated conservation areas are treated as any other building is treated and require Air Conditioning Energy Assessments (ACEAs) and Display Energy Certificates (DECs) if they meet the other qualifying criteria.
Buildings in Scotland
The Scottish Government has not attempted to exempt listed buildings or buildings in formally designated conservation areas from their regulations for energy efficiency. Instead, they have taken an approach where an assessor is required to consider the impact of improvement measures and their appropriateness for the specific building in question. As such, no exemptions from the requirement for an Energy Performance Certificate exist specifically for buildings that are listed or in formally designated conservation areas. [Click here to see guidance]
Listed buildings and those in formally designated conservation areas in Scotland require Energy Performance Certificates (EPCs) and Section 63 Action Plans if they meet the other qualifying criteria.
Buildings in England & Wales
Put politely, the situation for buildings in England and Wales is about as clear as mud. The wording in the current regulations is taken directly from the European Directive and says “buildings officially protected as part of a designated environment or because of their special architectural or historical merit, in so far as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance.”
When these regulations were enacted on 9th January 2013, it was generally accepted that listed buildings were exempt from the requirement for an EPC for sale or let although it was acknowledged that they would still require an EPC in other circumstances (e.g. Green Deal). This belief was re-enforced by guidance published by Historic England which includes the statement “An Energy Performance Certificate (EPC) is a legal requirement when building, selling or renting a property. However, there are exemptions for certain types of building and since January 2013 listed buildings have been exempted from the need to have an EPC.” However, Historic England’s Terms and Conditions include the usual disclaimers regarding their interpretation of the law in that the position stated was just their interpretation and that they accept no liability for its accuracy. In the absence of enforcement action or legal precedents being set, much discussion has continued both in and out of the legal community with differing interpretations resulting.
Moving forward to the latest guidance to come from The Department of Business, Energy and Industrial Strategy, the UK Government Department which now has responsibility for EPCs. Issued in February 2017, this update is contained within the guidance for landlords and enforcement authorities on the minimum level of energy efficiency required to let non-domestic property under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. The advice, published in Chapter 1 on page 19 is shown below:
“There is a common misunderstanding relating to listed buildings and whether they are exempt from the requirement to obtain an EPC. Listed properties, and buildings within a conservation area, will not necessarily be exempt from the requirement to have a valid EPC and it will be up to the owner of a listed building to understand whether or not their property is required to have an EPC. Where a listed privately rented non-domestic property, or a property within a conservation area, is required to have an EPC, that property will be within scope of the minimum energy efficiency standards.
“As noted at 1.3.3 above, an EPC is not currently required for a listed property or building within a conservation area when it is sold or rented in so far as compliance with minimum energy performance requirements would unacceptably alter its character or appearance. Examples of energy performance measures which may alter character or appearance (or as a minimum are likely to require local authority planning permission to install on a listed building) include external solid wall insulation, replacement glazing, solar panels, or an external wall mounted air source heat pump. Where character or appearance would not be altered by compliance with energy performance requirements, an EPC may be legally required.
“If an owner or occupier of a listed building is unsure about whether their particular property is or is not required to have an EPC, appropriate advice should be sought at the earliest opportunity.”
Exactly the same information is contained within the equivalent publication for domestic properties which has been published more recently in October 2017. Changes in other guidance documents issued by MHCLG (formerly DCLG) and BEIS have also been made to reflect this. However, whilst they tend to reduce the previously special status given to listed buildings to a par with other designations including Conservation Areas, National Parks, Scheduled Monuments and protected parks and gardens, they do little to clarify exactly how far an exemption applies.
This guidance would seem to suggest that the UK Government believes the exemption for listed buildings is much more restricted than had previously become accepted. Indeed, it would appear to be more compatible with the Scottish Government’s interpretation that the exemption is solely from making improvements that would unacceptably alter the protected building’s character or appearance and not from the entirety of the process. Similarly, it would appear to reflect an expectation that reasonable improvements, particularly where these would improve the energy efficiency of a building whose performance is currently very poor, should be carried out.
This is not without merit or logic. At the current time, an EPC in itself does not mandate that any works actually be carried out. The recommendations are just that, recommendations. Therefore a view could be formed that having an EPC can never unacceptably alter the character or appearance of the building. As such it could be argued no building can claim exemption from having an EPC on these grounds alone. Additionally, the current requirements under the MEES include provision for exemptions from making specific improvements where required third party consent cannot be obtained. Hence, if Listed Building Consent cannot be obtained from the relevant authorities no unacceptable alteration to the character or appearance of the building is required and so again, there is no need to apply this exemption from having an EPC.
Many councils provide guidance on improving historic buildings with Westminster City Council providing some of the most extensive and practicable advice we have found. This includes a document titled “Energy Efficiency in Conservation Areas” which discusses improvements that can be made without damaging historic structures.
Whilst Historic England seem yet to update their specific guidance on this limited exemption, they do provide a wealth of information for those wishing to improve historic buildings without damaging their character and appearance. Indeed, they acknowledge that ensuring a building remains useful and occupied is often the best way of protecting it for the future. Additionally, some energy improvement measures can also improve fire safety and resilience in historic buildings. It should be remembered that it was never the intent of the protection schemes to freeze buildings in time but instead to ensure that they are managed with appropriate sympathy and conserved for the future.
The background to this issue is also explored in a recent article by The Residential Landlords Association. They make the following observation in relation to the exemption of Listed Buildings from EPCs:
“So in reality, in terms of an EPC, the caveat is meaningless. Therefore, a landlord cannot know if an EPC is needed before they have an EPC for the property”
This article continues to draw the following overall conclusion:
“Regrettably, we simply do not know the answer to whether or not an EPC is required for a listed building; nor whether landlords who have rented out listed buildings will have to comply with Minimum Energy Efficiency Standards (subject to any other available exemption, e.g. limiting the amount they have to spend); or whether you need an EPC for a listed building in order to be able to rely on regaining possession under Section 21 of the Housing Act 1988. What is clear is that if you have no EPC then you do not have to comply with Minimum Energy Efficiency Standards from 2018 onwards. You could be liable for a penalty for not having an EPC and equally you might not be able to get possession back relying on Section 21. This is a wholly unsatisfactory state of affairs which needs to be addressed by the Government.”
Interestingly, at a recent industry conference (Spring 2018), representatives of both MHCLG and BEIS confirmed that they believed Listed Buildings should have EPCs completed and that recommendations should be implemented wherever possible but with appropriate sympathy to the building as a whole. They were unaware of the conflicting guidance from Historic England which they accepted may be the source of a lot of the current confusion and undertook to attempt to ensure that Historic England updated their guidance to more accurately reflect the limitations of any exemptions which may be available.
Unfortunately, as energy assessors, we are not in a position to provide legal advice but present this information to help you form your own opinion. However, we would point out that there is currently nothing to stop an EPC being completed on a voluntary basis even when one is not required by law. This may have its own implications and so building owners and occupiers should seek their own legal advice but voluntary compliance may provide a suitable solution.
Some listed buildings in England & Wales may be exempt from some or all of the Energy Performance Certificate (EPC) and Minimum Energy Efficiency Standards (MEES) requirements. However, specific legal advice should be sought on a case by case basis. It is unlikely that an exemption can be demonstrated without first having an EPC completed to confirm the recommendations proposed.
Buildings within formally designated conservation areas are less likely to be subject to exemptions.