Rural businesses with let residential property will be affected by new rules which came into force on 1 April, requiring landlords to spend up to £3,500 per property on energy efficiency upgrades.
Since the introduction of Minimum Energy Efficiency Standards (MEES) regulations on 1 April 2018, landlords have been prevented from granting a lease to a new or existing tenant on properties with an Energy Performance Certificate (EPC) below an E grade.
However, to date, landlords have been able to apply for an exemption to allow a property below an E grade to be let if they can prove that the improvements required could not be wholly funded by a third party.
This is because the original regulations were drafted on the assumption that landlords would be able to access Green Deal or other third-party funding and were not expected to pay for the work themselves.
However, the government announced last year that the ‘no cost to the landlord’ provision would be removed to make landlords liable for a financial contribution.
This change took effect on 1 April 2019 and means that landlords with a property with an energy performance rating of F or G will now be expected to pay up to £3,500 (inclusive of VAT and any third party funding available), in order to improve the energy efficiency rating of the the property.
Where a landlord has previously applied for a “no cost to the landlord” exemption, registered between 01 October 2017 and 31 March 2019, this will now end on 31 March 2020.
If a landlord is unable to improve their property to E within the £3,500 cap, then they will need to install all measures which can be installed up to the £3,500 cap, and then register an exemption on the basis that all relevant improvements have been installed and the property remains below E.
This new ‘high cost’ exemption requires three quotations to be sought for the cost of buying and installing the improvement, to demonstrate the total cost would exceed the £3,500 cap.
Any investment in energy efficiency works made since October 2017 will be counted within the £3,500 cap.
It has also been clarified that where a landlord registers an exemption because the current tenant of the property does not consent to an improvement, that exemption will only remain valid for as long as the tenant remains the tenant.
MEES regulations apply to all residential and commercial property where a new letting is being conducted, or a lease is being renewed. The regulations are designed to establish minimum efficiency standards across privately-rented homes.