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New Energy Regulations Could Have Costly Implications for Landlords

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From 1 April 2018 there will be a requirement for any property which is rented out to have a minimum Energy Performance Rating of E. New regulations will come into force for new lettings and renewals of tenancies from 1 April 2018 and for all existing tenancies on 1 April 2020.

Energy bandsEnergy efficiency improvements must be undertaken to bring properties up to a minimum E rating, unless the landlord can show the following exemptions apply:

  • The landlord has undertaken improvements that are cost-effective but the property remains below an E Energy Performance Rating.
  • The landlord is unable to install improvements that are cost-effective without upfront costs because the funding entails Green Deal Finance and the landlord, or the tenant, fails the relevant credit checks.
  • The landlord is required to obtain third party consent to undertake the relevant improvements and such consent was denied, or was provided with unreasonable conditions.
  • The landlord requires consent and the occupying tenant withholds that consent.
  • Measures required to improve the property are confirmed by a qualified independent surveyor as expected to cause a capital devaluation of the property of more than 5%.The landlord has obtained a written opinion from a qualified person advising that the installation of insulation is not an appropriate improvement due to the potential negative impact on the structure of the property.

A civil penalty of up to £4,000 will be imposed for breaches of the regulations. However, a breach of the regulations does not affect the validity or legality of the tenancy itself, so rent will continue to be payable.

The regulations could also have significant implications for landlords and for occupiers who wish to assign or sublet premises. For example:

  • Marketing of some properties would become impossible unless they meet the minimum standards
  • Valuations of properties could be affected if marketability is diminished
  • Rent reviews could be affected
  • Implications for dilapidations could also exist

For further advice on the impact of the regulations on your property, please contact us.

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