Blog: Letting agents, beware of an energy shake-up

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  • From 1 April, it will be unlawful to grant or renew a lease on a property rated F or G for energy performance 
  • From 2020, the ban will also apply to current, ongoing tenancies 
  • Landlords will need to make improvements to the energy performance of their properties
  • Breaches of the regulations will result in penalties of up to £5000 on residential properties and much more for commercial properties

No stone is being left unturned by the government in its aim to make renting fair and reasonable. Marc Brewer, underwriting manager for professional risks, Tokio Marine HCC, says it could prove a tough year for the letting industry.

Energy-efficient properties

From 1 April, the criteria for letting properties is going to change. Estate agents and letting agents will see fundamental changes when renewing or extending tenancies or granting new lets after the new regulations come into force. 

The Energy Act 2011 included changes to the law regarding the rental of either residential or commercial premises to reach a minimum energy standard as of 1 April. The Minimum Energy Efficiency Standard forms part of the UK’s commitment to meet its carbon reduction targets.

From this date, it will be unlawful to grant a new lease, extend or renew a lease on a property with an Energy Performance Certificate rating lower than ‘E’ (the minimum energy efficiency standard) for both residential and commercial properties. From 1 April 2020, the regulations will apply to both current, ongoing tenancies and new tenancies granted.

Breaches of the regulations will result in penalties of up to £5000 on residential properties and much higher for commercial properties. With thousands of properties with an EPC rating of F or G being let in England and Wales, landlords need to get their properties to a better EPC rating by making the necessary energy performance improvements before it is too late.

To meet their responsibilities, landlords will need to make improvements to the energy performance of their properties to ensure they do not fall foul of the regulations. The following are examples of the improvements that will be required to meet the minimum EPC rating:

  • Changing an old boiler to a more efficient one such as a condensing boiler;
  • Replacing existing halogen lights with low energy lighting such as compact fluorescent lamps or light-emitting diodes;
  • Installing renewable energy equipment such as solar panels, biomass boilers or ground source heat pumps;
  • Double glazing;
  • Roof insulation;
  • Cavity wall insulation

Estate agents and letting agents should make property owners aware of any properties that are sub-standard as soon as possible as it will become impossible to market properties unless they are upgraded.

Any failures to adhere will be subject to a straightforward outcome for landlords: they will not be able to grant a new lease, extend, or renew any on sub-standard properties. Failure to comply will lead to significant financial penalties. 

Improving tenants’ financial protection

The government is tightening its grip to raise standards. The Tenant Fees Bill proposes to ban letting fees paid by tenants and to cap security deposits. The aim is to help millions of tenants, who will no longer be hit with unforeseen fees, and to make the private rental market more affordable.

With the government proposing to cap tenancy deposits at six weeks’ rent, this will bring greater control and regulation giving tenants better clarity and peace of mind. Capping of tenants’ deposits may not come into force until 2019, but it shows the determination of the government to tighten the rules and regulations to bring any rogue landlords and letting agents in line.

Client Money Protection has also had much press over the past year. A government consultation on compulsory CMP cover in England and Wales is being carried out to recompense tenants and landlords of rent and deposits where monies have been fraudulently used or misappropriated. CMP cover is generally available to letting agents that are members of estate and letting agent trade bodies.

It seems like no stone will be left unturned until the system is deemed fair and reasonable by the government. It could prove a tough year for the industry with the changes and we will see what effect this will have on tenants, landlords and letting agents in the years to come.

Marc Brewer Tokio Marine HCC
Marc Brewer, underwriting manager for professional risks, Tokio Marine HCC

 

 

 

 

 

 

 

 

 

 

 

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Blog: The 130 missed opportunities to make a flooded home resilient

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