The continuing controversy over energy performance certificates in the rental market in Britain

Britain has one of the most progressive policies relating to requiring landlords to upgrade their properties to meet climate and energy goals. Yet, as Andrew Warren, chairman of the British Energy Efficiency Federation, writes in the July/August issue of Energy in Buildings and Industry magazine, it may be illegal to rent out a building without providing an energy performance certificate but if the landlord has ignored the certificate there is no compulsion to upgrade the property.

Cheating landlords must pay the price

Ever since 2008, it has been illegal to rent or lease outbuilding without providing the occupier with an Energy Performance Certificate, together with a detailed energy improvement survey. Shortly, nobody will be able to rent or lease out any building with worse than an EPC rating of E or above.

In Scotland, from this September you won’t be able even to sell such a gas-guzzling large (over 1,000 square foot) building.

Cause for celebration? Not unless those charged with ensuring compliance start enforcing the law rather better than they have been doing to date.

What alerted me to the serious limitations of the new policy was a formal briefing note prepared on these new requirements, prepared by the international law firm Eversheds.

It begins, as ever, with a list of the key exemptions where a property with an F or G energy rating might still be let.

For residential buildings, the regulations had initially been drawn up saying that landlords need only make improvements at “no upfront costs” to themselves. The demise of Green Deal Finance rather put paid to such a restriction.

Instead Ministers are considering amending the regulations to provide a simple cost cap for measures (possibly £5,000 per home). Far from onerous: research by Parity Projects confirms that the average cost of bringing F and G properties up to Band E is only £1,421, with more than 70% of properties able to reach Band E for less than £1,000.

For non-residential buildings, opt-outs include where all cost effective improvements, being works that would pay for themselves through energy savings within seven years, had been undertaken. Another concession is where an independent surveyor has determined that the energy efficiency improvements would devalue the property by more than 5%.

But the most devastating opt-out of the lot is simply stated. It says:

“If a property does not have an energy performance certificate (“an EPC”), then the regulations will not apply to it.”

Effectively, this means that if a landlord is already failing to comply with the initial legislation, to offer a current energy rating to a new tenant, then there is no need to bother with any thought about ever upgrading it.

This matters. A lot. Whereas in 95% of cases when residential properties are sold, a current EPC features within the transaction process, the figure for EPCs being offered to potential lessees is far lower.

According to Government estimates obtained via Freedom of Information procedures, just 26% of tenants are ever informed about the energy rating of the property they are about to inhabit. The rest are told nothing official about the likely size of their fuel bills.

The figures for compliance with non-residential leases is a bit better – but still only 48% of all transactions comply (again, information acquired via FoI requests).

So what this innocuous sounding opt-out achieves is that these new no F or G energy standards will not be applied in at least half of all commercial lettings. And in only one-quarter of new residential tenancies.

Whilst there is no empirical evidence one way or the other, it might be logical to assume that a landlord, who deliberately fails to provide a prospective tenant of such basic legally–required information like an EPC, might also be rather more cavalier than most about minimising how much energy the building wastes.

To my knowledge, no landlord has ever been prosecuted by any local authority for failing to provide an EPC. Acknowledging this, from September the Scottish government is ensuring that each local authority will have a new formal duty to enforce the regulations, and to impose a fixed penalty of £1,000 for failure to produce an EPC (and a further £1,000 for failure to implement subsequent recommendations swiftly).

I am assured that strenuous efforts will be made to ensure that Scottish councils do carry out both these duties. Awareness that those who try to cheat will be penalised, rather than ignored, should do wonders pour encourager les autres.

By the time the new scheme is introduced, the UK will have a new Prime Minister, doubtless full of reforming zeal. Just as is happening in Scotland, she should make it obligatory for all landlords to obey the laws of the land to help tenants enjoy lower fuel bills. Rather than leaving it as an option that only a virtuous minority ever bother to comply with.