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Energy Performance Certificates
and the Private Rented Sector

European Union Energy Performance in Buildings Directive 2002/91/EU (as amended SI 2010/31/EU)
and The Energy Performance of Buildings (Certificates and Inspections)(England and Wales) Regulations SI 2007/991 (as amended SI 2010/1456 & SI 2011/2452)

Commencement:

All buildings, whether residential, commercial or industrial are required to have an Energy Performance Certificate (EPC) that is no more than 10 years old, for every occasion when they are bought, sold or rented.  The requirement for such certificates came into force on 1st October 2008 for all premises when they are let after this date.  The regulations have since been amended and the new requirements come into force on 6th April 2012 (see below for these changes).

Scope:

The directive applies to any building that is rented out so it will be illegal to advertise a property to rent unless it has an EPC.  A certificate detailing its energy performance compared with reference values must be made available for each self-contained accommodation unit.   The certificate must be accompanied by recommendations of cost-effective measures to improve its performance, and is intended to ensure that the consideration of energy efficiency can play a proper part in the decision to rent or purchase the property.  Holiday lets which are rented out for a combined total of four months in any 12 month period will also require an EPC, mobile homes and caravans are exempt.  

The Energy Performance Certificate:

The EPC is broadly similar to the certificates found on many domestic appliances with an energy rating on a scale from A to G (A signifying the highest efficiency rating). The EPC includes information about the home’s energy use and carbon dioxide emissions.   Each EPC will have a unique serial number and be produced by energy assessors and home inspectors authorised and accredited by the Government.

Changes to the EPC are proposed from April 2012 to make it easier for households to understand how efficient their home is in comparison to others and what actions can be taken to save money and lower carbon dioxide emissions.   It is proposed that the first page will be made simpler to focus on the costs of heating a home and to show how much can be saved by introducing energy efficiency measures.

EPCs are valid for 10 years and can be reused as many times as required within that period.  It is not necessary to commission a new EPC each time there is a change of tenant.  An EPC is not required for any property that was occupied before 1 October 2008 and which continues to be occupied after that date by the same tenant.  However, when that tenant leaves an EPC must be obtained.

Landlord and Agent Responsibilities:

Prior to April 2012 it was the landlord’s responsibility to make available an EPC to prospective tenants but the 2011 Regulations, which come into force on 6th April 2012, have made the following amendments:

  1. The landlord is responsible for commissioning an EPC before the property is put on the market (i.e. made available for sale or rent) unless a valid EPC already exists. 

  1. Any person acting on behalf of the landlord (including a letting agent) must be satisfied that an EPC has been commissioned for the property before the property is marketed.  Enforcement officers may require an agent to produce a copy of the request for the EPC.  Prior to 6th April 2012 this only applied to estate agents.

  2. The landlord and letting agent must use reasonable efforts to ensure that an EPC is actually obtained within seven days of the property being on the market.  Where it is not available the landlord or letting agent must ensure it is obtained within a further 21 days.  Previously the requirement was for landlords to obtain the EPC within 28 days from the date the property was marketed.

  3. The first page of the EPC must be attached to any written description of the property which includes at least two of the following: a photograph of the building or any room in the building, a floor plan of the building, the size of the rooms in the building, the measured area of the building or the proposed rent.

  4. All air condition reports must be registered on the central EPC register from 6th April 2012.

The Regulations are enforced by Trading Standards departments.  Penalties apply for non-compliance of £200 per offence at the time of writing.   

Problems and benefits for the Private Rented Sector:

One problem for the rental market is that there is less incentive on a landlord to carry out energy efficiency improvements as any improvements will be a considerable cost to the landlord and there is currently no legal obligation on the landlord to make the improvements suggested.  The savings will generally only be enjoyed by the tenant through reduced running expenses but taking action to improve the energy efficiency may make it more attractive to prospective tenants.   There are grants in some areas to help landlords make improvements to their properties and landlords should contact their local authority to find out what is available.

Landlords could benefit from the Landlord’s Energy Saving Allowance Scheme (LESA) up to 1st April 2015.  LESA is a tax deduction for income tax when landlords make energy efficiency investments in the property.  It is available to all landlords who pay income tax and let residential property.   Tax relief is available up to a maximum of £1,500 each year per property.   LESA can be claimed for the costs of buying and installing energy saving products such as cavity wall and loft insulation, solid wall insulation, draught proofing and hot water system insulation and floor insulation. 

Currently, there are wide differences in the number of Domestic Energy Assessors (DEAs) available and needed around the regions. Whilst some areas have enough, others are very short of assessors. DEAs have to work with an accreditation body for the assessment to be valid. It is not enough to simply do the inspection; the inspection results have to be uploaded to an accredited provider.

Recommended Action:

Agents may well be able to negotiate bulk deals with firms of Domestic Energy Assessors as, for those landlords or agents with portfolios of properties, companies will offer discounts for multiple deals. Some DEAs use a process which can apply the same rating to more than one property of the same specification. So owners or landlords of blocks of flats with more than one unit of the same specification can adopt the same sampling procedure at a considerable discount as there is much less work involved than a complete survey.

Letting Agents who are also selling agents are likely to already have appropriate schemes in place. Any costs incurred in producing these Certificates will need to be taken into account over the letting period but as new certificates will only be needed once in 10 years this cost is likely to be small. Published examples of costs for certificates can be as low as £55 but the costs will depend on the age and size of the property concerned. Purchasers of property will receive a copy from the vendor which can then be used during any rental of that property.

Sources for Further Information:

 

This summary is intended to assist landlords and letting agents to understand the effect of these requirements. It is not an authoritative interpretation - this is a matter for the courts. For more detail, you should refer to the text of the regulations themselves.