With the deadline to comply with the government’s Minimum Energy Efficiency Standards (MEES) now less than a year away, Property Week spoke to four buy-to-let property experts in an attempt to clear up the confusion around the incoming energy policy.
Our experts:
- John Stewart, policy manager at the Residential Landlords Association (RLA),
- Vanessa Warwick, landlord and co-founder of Property Tribes,
- Hilary Grayson from National Energy Services
- Jason Harris-Cohen, managing director of the Open Property Group
When the new laws come into effect, will a landlord be forced to evict tenant(s) on a monthly rolling contract in a property rated below E? Will the landlord have to implement the energy efficiency changes if the tenancy agreement doesn’t end before 2020?
John Stewart (JS): Not if it’s a periodic tenancy. For existing tenancies, the law doesn’t take effect until 2020. However, if the landlord decides to issue a new tenancy agreement then the April 2018 deadline is effective.Landlords should not seek to evict their tenants. Firstly, the landlord should look to see if the property qualifies for any exemptions. If not, then in most cases, the necessary work can be carried out with the tenant in residence.
JS: If the property doesn’t qualify for an exemption and no work has been done to upgrade energy efficiency then it would be illegal to rent out this property after April 2020, and an eviction may be necessary.
A landlord has a tenant who renews annually but is likely to stay for at least five years. Will he have to implement the energy efficiency changes before 2020?
Hilary Grayson (HG): From my understanding, the MEES state that the landlord cannot ‘continue to let’ F and G properties after 2020. Therefore, we must assume that he may be in breach of the MEES if he lets a property today for a term that extends beyond 2020.
From my legal training all those years ago, I don’t think it is a defence in law to say, ‘he was not aware that these changes were coming’. So, I think he would be in breach. But no one is going to do anything about it now – he would be penalised after 2020 I think. But could not claim retrospectively that he did not know that this was coming.
JS: Yes, the key here is that the tenancy is being renewed annually, rather than simply rolling on, so the landlord wouldn’t be required to complete any work until the first renewal in 2019, should he be unable to register for exemption.
If you could describe this energy act in one word what would it be?
JS: Frustrating. We are still waiting for the final details on exemptions ahead of the register opening this October. We have a fair idea of the exemptions but not a full picture.
So far, the ‘Golden Rule’ of no upfront cost to the landlord has been abandoned with talk of a £5,000 cap on work to be completed. This of course, is not as attractive to Landlords as the tenant benefits from the potential savings made on energy bills, and landlords costs can only be recouped through increased rent.
Do you think this energy act is one of the biggest threats to private rented sector landlords?
Vanessa Warwick (VW): There are many threats facing landlords including Section 24, the implementation of the PRA, and increasingly onerous legislation, but creeping under the radar is indeed the Energy Efficiency Act. Many landlords are living in blissful ignorance that their property may be un-lettable when new regulations come into force in April 2018.
Affected landlords may not be able to afford to upgrade their properties, which could result in them being forced to sell. I’m not sure if it’s the biggest threat that private buy-to-let landlords have faced in recent years, but it’s up there.
Is there any chance we could see vast numbers of landlords being forced to evict their tenants, if they are unaware of these new regulations and fall foul of them?
JS: No, the number of properties this applies to is very small. Around 300,000. There is an issue with the accuracy on the EPC ratings for solid wall properties, so for example SUV scores on solid walls have been underestimated. This needs recalibrating and when this recalibration is complete, it could mean up to 100,000 private rented homes moving up to an E rating.
By the time exemptions are included, fewer than 100,000 homes could be affected.
There has been talk that as little as £500 could be needed to bring properties rated F and G up to E level. Is this realistic?
Jason Harris-Cohen (JHC): As John pointed out before, there is now a £5,000 cap on the amount of work that needs to be completed. If any more than this sum is required, you would be eligible for an exemption. Looking at where that £5,000 will go in a standard three-bedroom dwelling though, for an A rated energy efficient boiler: £2500 for supply and fitting. For Double Glazing, assuming 7 UPVC double glazed windows, you’re looking at £4000.
Loft insulation: 60 metre squared footprint at 270mm depth: £1000, or to save a bit of money, you can buy the materials from a builder’s merchant and install yourself between the loft joists and overlay to meet the minimum depth required to comply with building regulations. Cavity wall insulation: £3500-5000 depending on whether scaffolding is required. And for energy efficient lighting, you’d be looking at £15 per LED downlight, including labour costs from a qualified electrician. As you can see, that £5,000 cap doesn’t really cover that much.
Is this energy efficiency policy realistically enforceable? How will the government make sure all landlords are abiding by the new rules?
JS: It will be up to local authorities to enforce, and we all know their resources are stretched. As ever, good landlords will seek to comply with the legislation, while criminal operators will ignore these regulations, like they do so many others.
Councils need to focus their limited resources on the crooks, and let the majority of compliant landlords get on with their businesses.
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