The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 introduce minimum energy efficiency requirements which landlords of most domestic and commercial properties in the private rented sector (“PRS”) in England and Wales will need to comply with.

Restrictions on letting substandard properties (“The Restrictions”)

Subject to various exceptions and exemptions, the Regulations require affected properties to have an Energy Performance Certificate (EPC) rating of “E” or higher.

From 1 April 2018, it will be an offence to grant a new tenancy, or to extend or renew an existing tenancy of such a property with an EPC rating of below E. From 1 April 2020 (for domestic properties) and 1 April 2023 (for non-domestic properties) it will be an offence to continue to let such a property on an existing tenancy.

Enforcement

Trading standards officers (“TSOs”) will be responsible for enforcement and may serve compliance notices on landlords requiring the provision of information where they suspect a breach.

From 1 April 2018, TSOs can penalise landlords who breach the Restrictions or who fail to respond to a compliance notice. The penalties include publication of details of breaches and potential fines:

• For a breach of less than 3 months, you can be fined up to £2,000.00 for a domestic property and the greater of £5,000.00 or 10% of rateable value (up to £50,000.00) for a commercial property;

• For a breach of 3 months or more, you can be fined up to £4,000.00 for a domestic property and the greater of £10,000.00 or 20% of rateable value (up to £150,000.00) for a commercial property.

Financial and publication penalties also apply for registering false or misleading information on the PRS exemptions register.

Exceptions and Exemptions

Various exceptions and exemptions will apply. Short commercial property leases of less than 6 months or long commercial property leases of 99 years or more will be excluded, as will properties that are owner-occupied or those that are being sold, rather than let.

Although the Restrictions do not apply to sales, unless a non-compliant property is to be re-developed or owner-occupied, landlords should consider whether this may affect marketability and price negotiation. Lenders and buyers may require properties to be at least “E” rated.