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On the 22 July 2014 the Department of Energy and Climate Change (“DECC”) published two important consultations on the private rented sector energy efficiency regulations (domestic and non-domestic properties). On the same date DECC published the reports to Government from the Non-Domestic Minimum Building Energy Performance Standards Working Group (“non-domestic working group”) and the Domestic Private Rented Sector Regulations Working Group ( domestic working group”).
Both consultations close on the 2 September 2014 and DECC proposes to issue its response to the consultation and lay the regulations in early 2015 to provide the industry certainty on what the regulations will require.
The Energy Act 2011 places of duty of the Secretary of State to bring into force regulations on minimum energy efficiency standards. Domestic and non-domestic private sector Minimum Energy Efficiency Standard Regulations must be in force by 1 April 2018. This will mean that any property within scope of the regulations with an E or above rating will be in compliance with the regulations, and properties below this standard must install those measures required to reach an 'E' EPC rating. This is a critical issue for landlords with portfolios of private rented properties that may need energy improvements.
Domestic private rented sector Tenant's Energy Efficiency Improvement Regulations must be in force by 1 April 2016 and will empower tenants to request consent for energy efficiency measures that may not unreasonably be refused by the landlord.
The commercial property industry is a significant contributor to the UK economy According to the IPCC the built environment contributes to just under 12 percent of the UK’s carbon emissions and this offers the greatest opportunity for cost-effective emission mitigation of any other sector. To achieve the legislative targets CO2 emissions need to be ‘close to zero’ by 2050. Information on the EPC register shows that there are many opportunities to drive energy efficiency in existing stock. However, improvements have not been fully realized to date due to market, legal, and operational barriers. Key to this is the split between incentive and benefit – where the cost of improvements traditionally falls on the landlord while the tenant reaps the benefit in energy savings.
The government envisages that the Green Deal – a financing mechanism where the costs of retro-fit are financed by a credit and then repaid in installments through the electricity bill – will allow landlords to pay energy efficiency improvements without an upfront financial cost as tenants repay the costs through their energy bill repayments. How effective the Green Deal initiative will be remains to be seen. The Green Deal Finance Company is not currently offering finance on non-domestic properties, but will keep it under review. However, DECC acknowledges that the Green Deal will not be sufficient to meet targets and regulatory intervention, well posted in advance, is required.
The consultation sets out the government’s policy and asks for comment on 15 questions. The government’s proposals focus on the least energy-efficient properties (those with an EPC rating of F or G). The regulations will not apply to those properties which have an EPC rating of A-E (about 80% of the non-domestic properties), nor owner-occupied property. DECC propose and seek views as follows:
The full list of consultation questions can be found here. The non-commercial working group report also published by DECC on the 22 July 2014 is intended to inform the consultation. Members of the working group were drawn from key industry stakeholders including leading landlord, tenant, environmental and property professional organizations.
See the full report
One in five houses is privately rented and many of these homes have the lowest energy efficient ratings - an EPC rating of 'F' and 'G'. The Government proposes to set the minimum energy efficiency standard for private rented properties at an 'E' EPC rating by 1 April 2018. This will mean that any property within scope of the regulations with an E or above rating will be in compliance with the regulations, and properties below this standard must install those measures required to reach an 'E' EPC rating. This is a critical issue for landlords with portfolios of private rented properties that may need energy improvements particularly as Green Deal finding has been suspended: See our article DECC closes Green deal Home improvement Fund following overwhelming demand earlier this week.
The consultation sets out the government’s policy and asks for comment on 28 questions. Key issues include:
The full set of consultation questions can be found here:
The domestic working group was comprised of key landlord, tenant, environmental and professional organizations. Their report is intended to inform the consultation but does not represent the DECC’s views.
The full report can be found here.
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