A residential landlord's guide to Energy Performance Certificates
Why require Energy Performance Certificates (EPCs)?
The Government has to comply with EU requirements imposed by the Energy Performance of Buildings Directive (2002/91/EC).
When does it come into force?
The implementation of the directive takes place in various stages in order to meet the EU deadline of 4 January 2009.
EPCs will be required whenever a dwelling in the social or private rented sector is let to a new tenant after 1 October 2008. Where marketing activity is initiated before this date an EPC is only required if the dwelling is still being offered for let on or after 1 October 2008.
What buildings require certificates?
The requirement for EPCs applies to units as well as whole buildings. For residential purposes, this means any unit which does not share any essential facilities with any other unit (such as bathroom, shower room, toilet or kitchen) and which has its own entrance (either from the outside or through common parts, but not through another dwelling). This will cover most self-contained dwellings.
In certain circumstances EPCs for individual units may be based on an assessment made from existing data, or from data applicable to large numbers of similar dwellings owned by the landlord. Further guidance about how this will work in practice is available and may be of use.
Lease renewals and surrenders are excluded, as are rented rooms with shared essential facilities (such as those described above).
If the landlord already has an EPC for the dwelling (for example because it was recently purchased and an EPC was part of the Home Information Pack), the same EPC can be used for the subsequent letting. The 'How long are the certificates valid section below has more detail.
Where a tenant needs urgent relocation because of an emergency, landlords are exempt from the requirements to make an EPC available before renting out the dwelling if there is no valid certificate and insufficient time to commission one. However, an EPC must be provided as soon as is reasonably practicable after the renting out of the dwelling.
What must the certificate contain?
EPCs contain information about the energy efficiency of a building.
EPCs must include certain information, including:
- The asset rating of the building (how efficient it is on an A-G scale).
- A reference value or benchmark from which to judge efficiency.
- Reference number under which the EPC is registered.
- Name of the energy assessor and accreditation details.
- Date the EPC was issued.
An EPC must be accompanied by a report recommending improvements to the energy performance of the building, with indicative paybacks.
Although this is not an obligation, the landlord should advise the tenant that the estimated running costs:
- are based on standardised consumption (number of occupants and hours of heating per day);
- take into account costs for heating, hot water and lighting only and do not include the cost of appliances; and
- are based on average fuel prices current when the EPC was produced. The running costs could have been estimated up to 10 years previously and will not reflect the higher rates typically paid by those using prepayment schemes.
Who is responsible for obtaining certificates?
The landlord (or on a sub-letting, the intermediate landlord) must make the EPC available at the earliest possible opportunity to any prospective occupier. A copy of the EPC must also be given to the person who ultimately becomes the tenant before any rental contract is entered into. In each case, the EPC must be provided free of charge.
In addition, there is a duty on anyone with an interest in, or in occupation of, the building to co-operate regarding access etc with a person who is under a duty to provide an EPC.
How do landlords get the certificates?
Contact an accredited Domestic Energy Assessor (DEA) to carry out a survey of the property. Accredited DEAs can be contacted through the EPC Register. Landlords can also seek accreditation of their own staff.
The accreditation schemes' codes of practice will prevent DEAs from entering dwellings where there are unsupervised children present, and may also extend this to vulnerable adults. It is important (if appointing external DEAs) for landlords to make clear where there may be vulnerable tenants present, as the need to have accompanied visits may add costs or time to the process. For both tenanted and vacant dwellings, the DEAs should be made aware by the landlord of the landlord's health and safety precautions and any areas of particular risk that they may encounter.
A survey is carried out by the DEA to collect data on the building material, insulation, heating, lighting, glazing and ventilation of the property. Landlords may be able to reduce the cost of this survey, or forego the need for a site survey altogether, by providing the DEA with existing data so long as this data is accurate and up to date. Separate government guidance is expected later this summer on how to deal with large amounts of similar housing stock held by landlords. This will include guidance on sampling and multiple certification, and use of representative data.
The energy data is then entered into approved software to create the EPC. The EPC is then lodged on the domestic register by the DEA.
How long are the certificates valid?
EPCs are valid for up to ten years from the date of its production for rental purposes, and can be re-used for new tenants as many times as required during that period. However, where major energy efficiency works have been carried out on the property, the landlord may wish to commission a new EPC to reflect these improvements. Landlords should consider the cost effectiveness of doing this as improvements may not result in a new grade on the certificate.
If a building is converted so that it contains more or fewer separate dwellings, a new EPC will be required in relation to each new dwelling.
EPCs and the related recommendation reports must be registered; responsibility for this lies with the DEA who issued the EPC.
Cost of certificates?
The cost of an EPC is set by the market and includes travel time, the survey, data processing, production of the EPC, registration and compliance with any quality assurance procedures.
The survey process can be more expensive for landlords due to problems with accessing tenanted dwellings. As such, repeat visits or work at evenings and weekends may be required and landlords should take account of this in developing their EPC compliance strategy.
Landlords with larger portfolios should consider carrying out a tender process to appoint an external DEA, or having their own staff trained as accredited assessors.
Recommendations made to improve energy efficiency are currently just that. The landlord will not be required to improve efficiency. Therefore, should the landlord decide to implement recommendations and recover the cost through the service charge (where there is one), it would have to demonstrate the benefit of the work to the tenants and any re-charging would have to comply with the terms of the tenancy agreement.
For private sector landlords there is an argument that obtaining EPCs and improving energy efficiency will be an investment. It might enable the landlord to achieve a higher rent due to the lower running costs of the building and potentially increase its attractiveness to certain classes of tenant. It may also be seen as a generally beneficial service for tenants, enabling them to make informed decisions about the running costs of their potential home.
There are various schemes offering financial assistance for improvement works. These include:
- Carbon Emission Reduction Target – energy suppliers have government imposed targets to reduce carbon emissions. To meet these targets they fund installation of energy efficient measures. There may be schemes that will offer free or discounted measures. The Energy Savings Trust helpline (0800 512012) should be able to supply more information on relevant schemes.
- Landlord's Energy Saving Allowance – this allows private landlords who pay income tax to off-set up to £1,500 spending on energy efficient measures per dwelling (not building) per year.
- Warm Front – Grants up to £2,700 for households on certain benefits in England. The landlord does not need to be eligible; as long as the tenant is eligible, the property will benefit.
- Home Energy Efficiency Scheme – Grants up to £3,600 on a similar basis as Warm Front but in Wales.
How will the requirement be enforced?
Enforcement will be through Trading Standards officers issuing penalty charges notices to those who fail to comply. Trading Standards can issue a notice with a penalty charge of £200 per dwelling and the landlord will still be required to provide the EPC. No penalty is payable if the landlord requested an EPC at least 14 days before it was required.
Further information can be obtained from the Department of Communities and Local Government website. Read a copy of the guidance to the regulations, which provides further details on the matters covered in this analysis.
Jacqueline Knox, associate, +44 (0)121 685 2754, firstname.lastname@example.org
This analysis may contain information of general interest about current legal issues, but does not give legal advice.