Residential property
03 Sep 2019 News

New Energy Efficiency Regulations are coming to the Private Rental Sector

As the warmth of summer fades and autumn approaches thoughts turn towards that age old question: is it too early to turn the heating on? While for some a quick blast of the heating system will keep the house warm for hours, for others it’s a constant battle to maintain temperatures and stop the heat escaping. However, new regulations set to go before Holyrood in the coming months could change this and ultimately eliminate the battle. This is good news for tenant’s wallets but potentially an expensive exercise for landlords with older and less energy efficient properties.

The New Legislation

The Energy Efficiency (Private Rented Property) (Scotland) Regulations 2019 (“the Regulations”) set out a minimum level of energy efficiency which all rental properties must meet. Energy Efficiency is measured by using an Energy Performance Certificate which provides a rating from A – G.  The aim of the change in legislation is to start moving the bar upwards so that landlords make improvements to older properties to bring their energy efficiency performance as close to the A rating as possible.  The Regulations provided for a stepped approach so not all properties will necessarily fall foul at the introduction but may in the years that follow as set out below;

  • From 1 April 2020 all new tenancies must be a minimum E rating
  • By 31 March 2022 all tenancies existing or new must be a minimum E rating
  • From 1 April 2022 all new tenancies must be a minimum D rating
  • By 31 March 2025 all new or existing tenancies must be a minimum D rating

Exemptions can be gained where the improvements would exceed £5,000 to bring the property up to an E rating or a further £5,000 to bring it up to the D rating. Moreover, where all the improvements that are recommended by the surveyor in the EPC report have been made and the property still falls below the standard, no breach of the regulations will be found to have occurred.

Enforcement

Local Authorities will be given enforcement powers under the Regulations to ensure landlords are complying with the minimum energy standards. It is proposed that non-compliance with the Regulations for less than 3 months will result in a fine of up to £2,000 while those over 3 months could face a fine of up to £4,000.

Agricultural Tenancies

The Regulations currently only affect tenancies that meet the statutory repairing standard and are classed as private residential tenancies. Agricultural tenancies are presently excluded from the Repairing Standard, however this will change. From 28 March 2027 a number of agricultural tenancies including 1991 Act tenancies, SLDT’s, MLDT’s and limited duration tenancies will all be brought under the repairing standard and as a result must meet the minimum D rating for energy efficiency. Unfortunately for farms with numerous ageing cottages this may result in a large logistical and financial investment.  

Going Forward

Diversification into short term holiday lets is one way in which landlords can avoid falling under the repairing standard and the new regulations. Understandably this is not applicable to all landlords and therefore improvements will be inevitable. Government grant schemes to assist with energy efficiency improvements are available and should be seriously considered.

For those landlords with properties likely to become vacant in the New Year which fall below the E rating, a push should be made to get new tenants in before the 1st April deadline to gain some breathing space. While there may be some amendment to the regulation before they are passed in their final form, the message is clear, change is coming and improvements to your rental portfolio should be considered sooner rather than later.

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