Thursday 9 April 2020

Have new rules made your property unlettable?

Despite the challenges surrounding the Coronavirus, new regulations on energy efficiency still came into effect on 1st April, which could now make it unlawful to let your property. The Minimum Energy Efficiency Standards (MEES) have been known about for some time, so I hope this isn’t coming as a shock to landlords, but let’s take a closer look at what the latest changes mean.

Whilst every rental property has needed an Energy Performance Certificate (EPC) since 2008, from April 2018 it became unlawful for new tenancies or tenancy renewals to proceed in a property with a rating lower than an E. From 1st April 2020, these rules have been expanded to ALL tenancies i.e. no property with an EPC rating below an E should currently be tenanted (although some exclusions apply).

If you’re unfamiliar with EPC’s, they show a property’s energy efficiency on a scale from A (highest) to G (lowest). They are valid for ten years and you can easily look-up a property’s certificate online by visiting Landlords should therefore check their property has a valid certificate in place with at least an E rating and that the tenants were given a copy before they moved in (not doing so prevents you from serving certain eviction notices).

Those who fail to comply with the new laws face significant financial penalties; from £5,000 all the way up to £150,000 for repeat, long-term offenders. If you use a letting agent, be sure they are on top of this for you, as ultimately it’s the landlord that faces the consequences of not abiding by the legislation.

If your rental property falls short of the necessary rating, there are a couple of options available (although these should have been instigated before 1st April). It may help to know that the parameters of the rating system have changed recently too. I advised a new landlord of mine whose property had an EPC with an F rating from 2014 to get it re-assessed, which resulted in a newly updated D rating; making it legal and ready to rent with the minimum fuss, effort and cost to the landlord.

In many cases though, improvement measures will be needed to increase the energy efficiency sufficiently so as to achieve the minimum rating. Landlords could previously apply for an exemption based on improvements costing them money (if funding was unavailable). These were removed last year however, so landlords must now spend upto £3,500 of their own money to achieve the required rating, before an exemption will apply based on excessive costs.

There are some other exemptions that can be applied for, such as for flats whereby the freeholder won’t improve the building or where it would have a negative impact to do so (such as with listed buildings). New landlords also get a six-month exemption to give them time to get improvements done, although the nature of them would typically mean works will be necessary before tenants occupy the property.

It is likely that the energy efficiency rules will become more stringent in the future too. Whilst an E rating may be okay for now, calls for further environmental improvements is set to see the minimum requirement rise to a D rating by 2025 and a C rating by 2030. Landlords should therefore consider this when viewing properties for investment, or factor in the need for money to be spent on energy efficiency improvements in the future.

If you’re in the process of purchasing a buy-to-let property and would like me to check its long-term viability, please get in touch.

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