On 20 September 2023, the government announced that the proposed energy efficient targets for households, including rental properties, would be scrapped. Solicitor Joe Genco examines what this means for landlords of residential properties.
In 2015, the government introduced the Minimum Energy Efficiency Standards (MEES), which provided that private rented property in England and Wales must have an EPC rating of E or above. These standards came into force on 1 April 2018 for new tenancies and on 1 April 2020 for existing tenancies.
There is a maximum cost cap for complying with the standards. Landlords cannot be required to pay more than £3,500 per property, including VAT and outside funding, such as grants. If the property still does not meet the minimum EPC rating after spending this amount on improvements, landlords can register an exemption.
In 2020, the government began a consultation on tightening the MEES rules. The proposed changes were:
- the minimum EPC rating to be raised from E to C (i.e. a greater level of energy efficiency). This was to be enforced from 1 April 2025 for new tenancies and from 1 April 2028 for existing tenancies.
- the cost cap to be raised from £3,500 to £10,000 per property. The government believed this would bring more than 90% of D-rated properties to a C rating and nearly 60% of E-rated properties.
- a “fabric first” policy to be introduced, controlling the order in which work is carried out. Improvements to the fabric of the building (i.e. insulation, windows and doors) would be done before additional measures, such as new heating systems, are installed.
The proposed changes would have forced huge numbers of landlords to make expensive upgrades within the next two years.
In anticipation of these MEES changes and to spread the cost of making the necessary upgrades, many landlords have already improved the energy efficiency of their properties at great expense. Some landlords even took drastic steps of selling their properties because it was financially or practically impossible to make the necessary improvements.
The government’s speech announced it is scrapping the proposed changes to the MEES rules. This will be a huge relief to many landlords as there is now no hard deadline for them to upgrade D or below-related properties.
The next general election may result in the winning party reintroducing new EPC rules. So, although the government’s announcement provides respite for landlords, it brings further uncertainty into a property market that would benefit from greater stability.
If you would like to discuss a matter relating to EPCs and residential property, please contact Joe Genco at [email protected].
Disclaimer: The above is merely general guidance and should not be relied on as formal advice. We suggest you take professional legal advice before taking any action in relation to the issues discussed above.