Landlords to Spend Up to £3,500 Under Energy Rating Rules

Since 1 April 2018, new tenancies, renewals or extensions require the property to have a minimum “E” energy rating. From 1 April 2020, all existing tenancies must comply.

If a property does not meet the minimum “E” rating, the property can be registered on an exemption register, citing several reasons for the property to be exempt.

This continues, but from 1 April 2019, changes are made to exemptions that are allowed by The Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2018. The changes apply to England and Wales.

Before 1 April 2019, an exemption could apply if the landlord could not make any recommendations to bring the property up to the minimum rating at no cost to the landlord.

From 1 April 2019, this will change to a cost cap and recommended energy improvements must be made up to £3,500 (including VAT), wholly financed by the landlord or partly by the landlord and some available finance (such as Green Deal finance).

If, after spending £3,500, the property still doesn’t reach an “E” rating, the property can be registered as exempt (with extensive evidence requirements relating to the expenditure).

The cost cap can include sums spent since 1 October 2017 (Regulation 24(4) The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015)

(4) In paragraph (3) and in the Schedule, “the cost cap” means £3,500 less—

(a) the total sum (including value added tax) spent by the landlord on unregistered energy efficiency improvements made to the property in the period beginning with 1st October 2017 and ending with 31st March 2019, and

(b) the total cost (including value added tax) of unregistered energy efficiency improvements made to the property on or after 1st April 2019.

(5) In paragraph (4), “unregistered energy efficiency improvements” means energy efficiency improvements within paragraph (1) that have not been identified, in an entry on the PRS Exemptions Register, as having been made.

The other significant change is if a property was previously exempt because improvement works could not be carried out due to the tenant not giving consent. From 1 April 2019, the exemption ends when that tenancy ends (so the work must be completed before applying to go back on the exemption register if necessary).