What You Need to Know About Minimum Energy Efficiency Standards

Wide angle shot of wind generators in a field

It’s now been a few weeks since the introduction of minimum energy efficiency standards in England and Wales, so we’ve decided to look a little closer at exactly what these minimum energy efficiency standards are, the effects on landlords, and the repercussions of not abiding by the legislation.

What Are the New Minimum Energy Performance Standards?

As of April 1st 2018, it is now required for any new lets and renewals of privately rented properties to have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). And this is required for existing tenancies as of 1st April 2020.

These new rules apply to most domestic private rented sector properties in England and Wales, and you will be required to abide by the new minimum energy performance standards if:

• A new assured tenancy is granted, including a shorthold
• An existing assured tenancy is renewed or extended, including a shorthold, by agreement with the tenant.
• A fixed term assured tenancy comes to an end and a statutory periodic tenancy automatically comes into existence.
• A Rent Act protected tenant is granted a new tenancy for this property or another owned by the same person.
• The property has agricultural occupancy.

Generally, if you are required to have an EPC, then you will likely be within the scope of the regulations.

What Happens If You Ignore the Standards?

Don’t comply and you will be seen to be breaking the law and a civil penalty of up to £4,000 may be issued. Your property will be deemed ‘sub-standard’ and you should not rent it until improvements are made. Efforts to source your desired level of property finance may also be impeded as a result.

What Do Minimum Energy Efficiency Standards Mean for Landlords?

The new regulations mean that you can no longer rent out a property with a rating of F or G, something that is good news for tenants, but could be an expensive job for property owners to rectify.

There are no set rules regarding which improvements are made. Instead it is at a landlord’s discretion to decide what works should be made to meet the minimum E rating. If a higher rating is achieved, even better.

If your current energy assessment was carried out more than 10 years ago, we would recommend having this updated to ensure it is accurate. This is also important as the bands have changed in recent years.

There are some exemptions to the minimum energy efficiency standard rules. Buildings and monuments officially protected as part of a designated environment or due to their special architectural historical merit (i.e. listed buildings), temporary structures, residential building used for less than four months of the year, and stand-along buildings with a usable floor space of less than 50 square meters are all exempt.

What About Business Properties?

A non-domestic property is defined as any rented property that is not a dwelling and the appropriate minimum energy performance standards are similar for new tenancies, yet do not apply to continuing tenancies until 1st April 2023.

Need Finance to Improve or Develop a Property?

Whether you’re looking to invest in a building to improve its energy efficiency or you have plans for a new build project, find out more about your development finance loan options by getting in touch with our specialist brokers.

Read more:
A Guide to Commercial Property Investment for Buy to Let Landlords
What is Land Transaction Tax and What Does It Mean for Developers?
Could Mezzanine Finance Help You?

Article By Tom Rowlands

May 18th, 2018

Tom joined Pure Property Finance in 2017 after a career as a Client Wealth Manager, where he spent just under 3 years advising on financial and tax planning. Tom specialises in bridging finance and property development funding, having completed deals ranging from a simple £30K property purchase through to £2m+ mixed-use developments.

See more articles by Tom

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