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New consultation: Government consults on increasing energy efficiency ratings required before residential property can be let in England and Wales

Landlords of private residential property in England and Wales may wish to respond to a government consultation proposing that the energy efficiency rating required before such properties can be let be raised from an E rating to a C rating.

November 2020

This update was published in Legal Alert - November 2020

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

Currently, subject to a narrow set of exemptions, a landlord cannot let a private residential property unless it has an energy performance rating – the rating based on the total energy costs incurred in heating and lighting the property - of at least E. This means properties with a rating of F or G cannot be let.

The proposal is that properties must achieve a C rating before they can be let – so properties with a rating of D or E will not be lettable without spending money on energy efficiency improvements.

The preferred option in the consultation is to introduce the new requirement for a C rating in two phases. It would apply to new private residential lets (and renewals of existing lets) from 1 April 2025, and then to all private residential lets from 1 April 2028.

However, alternative options include introducing the new C rating for all private residential property in one go, from 1 April 2028; introducing the new rating in two phases, but on earlier dates; or introducing the new rating in more than two phases.

The consultation also proposes changes to the spending cap. Currently, a landlord cannot be required to spend more than £3,500 (including VAT) on improvements to achieve the required rating. The consultation proposes that this cap be increased to £10,000. This would mean a landlord with an energy inefficient property might have to spend nearly three times as much on improvements towards bringing the property up to the required rating as they do now.

The consultation also asks for views on how to encourage landlords to spend money on the energy efficiency of the fabric of properties first, before making other improvements. One option put forward is to make a ‘fabric-first’ approach compulsory.

Another area where views are sought is whether to integrate the rules on energy efficiency standards with the separate environmental impact rating (EIR) rules, which regulate carbon emissions from a property. If this were to happen, and properties needed to achieve a C rating for both, the government proposes that the costs cap referred to above would be increased to £15,000 rather than £10,000.

The consultation also asks for views on how to encourage compliance generally – for example, by creating a new, independent, property compliance and exemptions register, funded by a fee of £30 per property registered, and giving local authorities power to enter properties and impose penalties of up to £30,000 for non-compliance with the ratings rules.

The consultation ends on 30 December 2020. The government plans to give its response to the consultation in spring 2021, with a view to introducing the new rules in autumn 2021.

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