Landlords must not use this loophole

With legislation imminent to boost the energy efficiency of the rented property sector it is essential landlords don’t have a get-out to avoid making improvements.

At last. Next month we will see what is arguably the most important buildings sector energy efficiency initiative of the 2010/15 Coalition Government taking effect.

Five years after the relevant legislation was passed, the Energy Efficiency (Private Rented Property) Regulations will come into effect. Or at least they will in England and Wales.

From this April, landlords will not be able to refuse any reasonable requests from existing tenants to improve their property’s energy performance. Importantly, local authorities also acquire powers to act on behalf of tenants.

And in two years time, the law will affect all new tenancies. From April 2018 it will be illegal to rent or lease out any home or business premise that has less than an “E” energy efficiency rating.

When the legislation was enacted in 2011, the government estimated that this should ensure that 682,000 of the worst domestic properties would have to be improved. Those in fuel poverty currently live in the majority of these. Sadly, those living in homes in multiple occupation (effectively those with communal facilities like kitchens and bathrooms) do not appear to be included within the current regulations.

However, the more immediate impact is already evident in the commercial sector, where owner occupation is relatively unusual, and a far larger proportion of buildings leased out.

It is this sector where there has already been a far more significant response to the legislation. From the start, there have been several large property agencies that have been approaching larger commercial landlords - including pension funds and insurance companies - warning about the implications for their investment portfolios.

Even though the F- and G-rated buildings would still be able to let right up until April 2018, retaining these in any property portfolio was automatically damaging its long-term value. While in theory sales of such energy-inefficient properties will still remain perfectly legal after 2018, in practice the marketplace has been discounting their value.

It has long been accepted that at least one in five commercial buildings already are below the minimum standard. And while no Minister since last May’s election has breathed a word to that effect, it is commonly whispered within the property industry that it won’t be too long before properties with E or even D ratings will be caught by an extension of the regulations.

To read the full article, see the latest March edition of EiBI by registering for free here.

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