Is it true that properties with an Energy Performance Certificate rating of F or G cannot be rented out from 2018? If so, does it apply to both residential and commercial properties?
The Energy Act 2011 obliges the Secretary of State to make regulations prohibiting the renting out of commercial or residential properties which fall below a minimum energy efficiency level, unless 'relevant energy efficiency improvements' have been carried out. Such regulations are required to take effect no later than 1 April 2018.
The Act says no more than that but the Government's current intention is understood to be that the regulations will take effect on 1 April 2018 and that the minimum energy efficiency level will be an EPC rating of E. That does not mean that F and G rated properties (which represent nearly one in five commercial properties and a slightly lower proportion of rented residential properties) cannot be rented out after that date, but landlords will have to carry out all works which can be funded without upfront cost through schemes such as 'Green Deal' and ECO (Energy Company Obligation).
The regulations will also have to confirm whether there will be a soft start on 1 April 2018 (where the regulations only bite the next time the property is rented out after that date) or a hard start (where landlords will immediately be in breach on 1 April 2018 if there is already a lease in place at that date).
Although the position will not become entirely clear until the regulations are published, landlords cannot afford to wait until then and should be reviewing their position now on the assumption that the regulations are as currently expected. Landowners should also anticipate that in time the prohibition will be extended to other dealings with energy inefficient properties and that the minimum energy efficiency level may in time be increased.
Private residential landlords also need to be aware of another Energy Act provision which means that by 1 April 2016 landlords will not be able to unreasonably refuse a tenant's request for consent to make energy efficiency improvements which can be funded through 'Green Deal', ECO or similar schemes. There is no equivalent provision for commercial properties.
Tim Richards is an associate in the property team at Hill Dickinson, email@example.com