Do you own a domestic private rented property with an energy efficiency rating of F or G?
Did you know that it is unlawful to let such a property unless an exemption has been registered with the Private Rented Sector (PRS) Exemption Register?
This is according to the Minimum Energy Efficiency Standard (MEES) Regulations that determine the minimum energy efficiency level for domestic private rented properties to be let. Currently the minimum energy efficiency rating is E Band, but this will increase to C Band by 2026.
The MEES Regulations apply to all domestic private rented properties that are let on specific types of tenancy agreements as well as those legally required to have an Energy Performance Certificate (EPC). An EPC is a legally valid document which lets you know how energy efficient a property is (displayed on a scale from A to G) in relation to its running costs. What is an EPC?
Enforced by local authorities, failing to comply with MEES Regulations may lead to the issuing of a compliance notice, followed by a hefty financial penalty up to 18 months after the breach has taken place.
The Seven Private Sector Rental (PRS) Exemptions
There are seven PRS Exemptions to MEES Regulations that landlords of domestic private rented properties may apply for if the property in question meets the requirements for any of the exemptions and the landlord is able to provide supporting documentation. Each exemption is valid for five years, unless otherwise stated.
To register an exemption, the landlord must provide:
- The address of the property
- The type of exemption being registered
- A copy of a valid EPC for the property
- All supporting documents that prove the property meets the requirements
Vibrant Energy Matters’ Technical Resolution Manager, Carol McKeown sheds some light on the list of exemptions.
1. High-Cost Exemption
If the cost of installing even the cheapest recommended measure to improve the property’s energy rating to E Band exceeds the government determined £3,500 spending cap, a landlord can register a high-cost exemption.
“You will require three quotes from qualified installers and written confirmation stating that the install would exceed the cost of £3,500 would be required in order to apply for this exemption.” says McKeown.
“When the five year exemption expires, as a landlord you would have to try again to improve the property’s EPC rating to E. If it’s still not viable, then you would have to register another exemption.”
2. Third Party Exemption
McKeown says a landlord would be able to apply for this exemption if, for example
- The freeholder refuses access to install the recommended improvements
- The tenant refuses entry to install improvements
- The Planning Department refuses to allow the improvements
- Consent is given by a third party but with unreasonable conditions.
This exemption lasts for five years, or until the tenancy of the tenant that refuses entry to install improvements comes to an end or is assigned to a new tenant. The landlord will have to supply documentation or copies of correspondence that demonstrate refusal or that permission was granted, but subject to conditions that are unreasonable to comply with.
3. Property Devaluation Exemption
“A Landlord would be able to apply for this exemption if evidence can be provided that making the energy efficiency improvements would devalue the property by more than 5% if they were installed. For example installing wall or floor insulation in a property with known issues of damp,” she said.
Important to note, as per the UK government’s guidelines for the regulations and exemptions (www.gov.uk), the evidence report for this would need to be obtained from an independent surveyor that is on the the Royal Institute of Chartered Surveyors (RICS) of register of valuers.
4. 7 Year Payback Exemption
The seven year payback exemption applies when an independent energy assessor finds that the savings on energy cost over seven years will be less than the amount spent on an upgrade, or that all cost-effective energy efficiency improvements have been made.
McKeown said the typical costs to install internal or external wall insulation is between £4,000 – £14,000, while the typical yearly saving is estimated £4,081 (£583 x 7 years).
“Therefore, if the cheapest quote to install internal wall insulation in this property was £4,000, then the landlord would not qualify for the exemption. However, if the cheapest quote was £10,000, then the landlord would qualify for the exemption,” she said.
5. All Improvements Made Exemption
If a landlord has made all the recommended energy efficiency improvements and the property still has a rating of F or G, then an all improvements made exemption can be registered with the PRS Exemption Register. Once again, the landlord would have to provide supporting documents to show that the required improvements have been made.
6. New Landlord Exemption
McKeown comments that the keyword here is “temporary”. The temporary six month exemption exists to afford a new landlord an opportunity to assess the property’s energy efficiency by means of an EPC and then register the relevant exemption if necessary. The exemption registered after expiration of the new landlord exemption will last for five years unless otherwise stated.
7. Wall Insulation Exemption
If the only improvements that can be recommended for a property are cavity wall insulation, external wall insulation, or internal wall insulation and an expert has advised the landlord in writing that any of these improvements would negatively affect the fabric or structure of the building, a wall insulation exemption can be registered.
McKeown said the landlord would need to supply a copy of this written report stating that the recommended wall insulation would damage the property and the property therefore cannot be improved to an EPC E Band.
The landlord can cancel the exemption if he or she improves the property to E Band or stops letting it.
Submitting the necessary documents for you selected PRS Exemption
Vibrant can provide landlords with guidance on the RPS Exemption Registration, acquiring an EPC Certificate for a property as well as the three quotes required to meet the desired property rating. With the admin taken care of, saving time and money, its one step closer to letting out a property.