Recently we were lucky enough to have wonderful Peter Williams of Falco Legal Training in the studio to discuss the minimum energy efficiency standard and the Heat Network Regulations as part of our upcoming Property channel programme, ‘Green Issues for Landlords and Tenants’. Here is an exert from that forthcoming interview:
Interviewer: What is the central aim behind the introduction of the Energy Efficiency Regulations 2015?
Peter Williams: The purpose of these Regulations is to cut down the amount of energy used in the UK. UK carbon emissions 25% of those are thought to be domestic houses and another 12% commercial buildings, and the aim is to target tenanted buildings, which is a fair proportion of the building stock as a whole. And the Energy Act 2011 contains provisions that require the Secretary of State to make Regulations to ensure that this happens.
Interviewer: Can you explain the way in which the minimum energy efficiency standard is going to operate?
Peter Williams: Yes. The Regulations that provide for this were made under the Energy Act 2011 and the Secretary of State was required to make these, and the standard has to come in to effect no later than April 2018. So the Regulations operate in two different ways. First of all, they say that landlords are not permitted to grant leases, both of residential and commercial property, of property with an energy rating of less than E, unless they’ve carried out works that are cost effective to improve the energy efficiency of the property, or one of the exemptions applies. So that’s the first. And the second one is that from a later date, which is 2020 for domestic properties and 2023 for commercial properties, landlords won’t be allowed to continue to let properties, which means that they’ll have to carry out works to improve the energy efficiency of property that is already let.
Interviewer: The minimum energy efficiency standard applies to both domestic and non-domestic private rented property. Why in practice is this not going to be workable in relation to domestic property?
Peter Williams: This is to do with Green Deal funding. Landlords have to carry out cost-effective energy efficiency improvements, and the way that’s defined in the Regulations is that it’s works for which the landlord can obtain Green Deal funding. And that means taking advantage of the government’s Green Deal, which is borrowing money for energy efficiency improvements which is then paid back through a levy on the electricity bill. And the Green Deal runs with the property so that it can be passed on between different owners. Now landlords are only required in domestic properties to carry out works for which Green Deal funding is available, but relatively recently, the middle of 2015, the government withdrew all Green Deal funding. It had been available, but the government announced that no further funding was going to be made available. And therefore it’s unclear now how landlords are going to be able to carry out any cost effective improvements when Green Deal funding is no longer available. So we’re waiting for some sort of announcement from the Department of Energy and Climate change, which is the responsible government department for this as to how they think this is going to work in the context of domestic properties.
Interviewer: Focusing on non-domestic private rented properties then, which properties are going to be covered by the standard?
Peter Williams: Right, so we’re looking at commercial properties principally now, and that’s defined in the legislation as any property that isn’t a dwelling, so dwellings are fairly self explanatory. There will be borderline cases, but we can look at them individually as and when they arise. But generally, therefore, we’re looking at commercial properties which are being let. There are exclusions for very long leases, so leases of 99 years or more from the date when they were granted are exempt, and also very short lets are exempt as well, so that’s leases of six months or less, unless the tenant has already been in there for 12 months, which is an anti-avoidance provision, obviously. Now the only properties that are covered are those that have a valid energy performance certificate, or EPC. So obviously all properties now need an EPC for the next letting, but there will be some properties where there may be no EPCs, even though leases have been granted. And also there are some properties for which EPCs are not needed at all, listed buildings is a classic example where we think that no EPCs are needed. So generally, if you don’t need an EPC then you’re not within the minimum energy efficiency standard regulations.
It was great to finally have Peter in the studio after making contact at an SRA event looking at the future of Continuing Professional Development, and we are grateful to him for giving up his time to come and speak to us on this important subject for landlords and tenants of all properties.
Until next time…
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