This is your timely reminder that should the Minimum Energy Performance of Buildings (MEPB) Bill, currently on its second reading in the House of Commons, be passed, that the next set of energy performance changes to hit the property market are due to come into force in December 2025. Whilst this may seem like a long way off, bear in mind it was two and half years ago that COVID-19 took over our lives and that only seems like yesterday. So, are you ready for the change?
What are the current rules?
Under the current Minimum Energy Efficiency Standards (MEES) Regulations, a Landlord of both domestic and non-domestic privately rented property must not grant new leases, or continue existing leases of “sub-standard” properties. A property will be “sub-standard” if its energy efficiency rating is an F or a G.
What does the MEPB Bill say?
To meet the Government’s commitment to increase the energy performance of buildings within England and Wales, the Bill requires any residential tenancy granted on or after 31 December 2025, to have an energy efficiency performance of at least Band C. All tenancies entered into before 31 December 2025 have a further grace period, but must be at Band C from December 2028.
What does Band C mean?
The energy performance of a property is measured using the “Standard Assessment Procedure” (SAP) which is a point system ranking a property’s energy efficiency on a scale of 1 to 100, 100 being the best possible outcome. Band C requires a property to achieve between 69 to 80 SAP points. Points are acquired based on energy efficient measures that are in place at a property. Actions such as installing double-glazing and/or loft and wall insulation, replacing your boiler or even installing solar panels are likely to increase your score to a Band C rating or above.
How many homes are affected?
In a report published in January 2022 by the Office of National Statistics it was noted that only 42% of assessed homes in England were rated C or higher and only 37% in Wales. The figures vary across counties, as home types differ with the biggest factor being the age of the property. It is important to note that the statistics are based on analysis of homes for which an EPC exists and as such, does not reflect the whole of the housing stock in England and Wales. However, given that Landlords should not be letting properties without an EPC, the statistics mentioned are likely to be a fair representation of the letting market – so clearly there is a long way to go to make sure all Landlords are compliant by 2025.
What steps should I take now?
EPCs have a shelf life of 10 years, so the first thing to do is check the expiration of your current certificate. The next is to check the rating.
If your current certificate expires after 31 December 2025 and your property is already at a Band C or higher, then sit back and enjoy your investment. Equally, if your certificate is a C and expires before 25 December 2025, then assuming you have not done anything to your property, which may reduce its SAP Points, then you simply need to renew your certificate in the normal way on expiry – job done!
In the event that your current rating is below a C, whether or not the certificate expires before or after 31 December 2025, it is wise to start considering what measures you can put in place now to ensure that you will be compliant when the time comes. Advanced planning will not only help you manage costs but prevent a last minute rush when suppliers and contractors may be at their most utilised to meet demands.
What happens if I’m not compliant?
It is likely that similar consequences to the MEES Regulations will apply, meaning that it will become illegal to enter into new tenancies after 31 December 2025 if your EPC rating is less than a C. Both civil and criminal penalties will potentially apply, which under the current regulations could include fines of up to £5,000, perhaps more.
Are there any exemptions?
The MEPB Bill in its current form does state that the requirement to have a C rating from 31 December 2025 or 2028, as applicable, will only apply where “practical, cost-effective and affordable”. What this means in practice is yet to be determined as the current Bill provides for the Secretary of State to define what these terms mean within the new regulations once enacted.
Remember the proposed new regulations, once enacted, will not only impact domestic Landlords. The next to be hit by changes will be domestic mortgage lenders and non-domestic Landlords who will have to ensure that their portfolios are at least EPC Band C by 31 December 2030 – forewarned is forearmed.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at August 2022.