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In the guide
The minimum standard of energy efficiency of certain non-domestic rented property is a rating of E or above
This guidance is for England & Wales
The Energy Efficiency (Private Rented Property) Regulations 2015 are intended to improve the standard of energy efficiency in both the domestic and non-domestic private rented sector in England and Wales.
The Regulations target properties that are currently rated F or G on their Energy Performance Certificates (EPCs), implementing measures to raise their rating to a minimum of E. This will reduce the emissions produced by heating and powering these buildings, which currently accounts for 12% of UK emissions.
This guidance covers the requirements for non-domestic property (those that are not dwellings).
The Regulations prohibit the letting of substandard (lower than band E) non-domestic property, under a phased approach:
The Regulations only apply to those properties that are legally required to have an EPC. Since 2008, the majority of non-domestic properties have been required to have an EPC. There are exceptions if the property is:
See the 'Energy Performance Certificates' guide for more details.
Both private, local authority and other public body landlords are covered, as well as a tenant who sublets a property falling within the scope of the Regulations. The Regulations do not apply to properties let on a tenancy of less than six months or more than 99 years.
The Regulations also contain similar requirements for domestic properties, although commencement dates are different. Where a property is of mixed use, in that it contains both residential and commercial units (such as a shop with a flat / flats above), and these are let separately, the relevant provisions for domestic property will apply to the flats, and the non-domestic requirements to the shop. If the property is let as a whole then the landlord will need to examine the tenancy to determine whether it is a residential or commercial lease.
If the EPC for the property currently shows a rating of F or G, then the landlord must make improvements to bring the property up to an E rating before the relevant date.
If the tenant has a right to renew under the Landlord and Tenants Act 1954, the Regulations do not interfere with these rights, therefore neither the tenant nor the landlord can use the non-compliance as a justification for refusing to renew, or terminating the lease early.
To improve the energy efficiency of a building there are a number of possible improvements that may have been recommended by the energy assessor compiling the EPC, or can be obtained through a surveyor or other energy efficiency advisor. This may include improvements or extensions to heating and ventilation systems, insulation, glazing, etc.
The Regulations are intended to have zero cost implications for landlords; they only require that energy efficiency improvements that meet the 'seven-year payback' test must be made. The seven-year payback test means that the expected value of the savings on energy bills that the improvement is expected to achieve over seven years is greater than the cost of repaying it.
The value of savings must be calculated using the approved methodology, which is the methodology for calculating EPCs, and using relevant energy prices. Although the Regulations do not specify who should make the calculation, the Department for Business, Energy and Industrial Strategy (BEIS) guidance (see 'Further reading' below) refers to 'a competent non-domestic energy assessor, such as a level 4 accredited non-domestic energy assessor (NDEA)'. Landlords can find an assessor via the Non-Domestic Energy Performance Register.
If, having completed the calculation, the value of savings on energy bills is less than the cost of the improvement then it will not meet the payback test, and therefore the improvement will not be a relevant improvement for the purposes of the legislation and it will not be required to be installed.
If, however, the value of savings is more than or equal to the cost of the improvement then the landlord will have to make the improvements before the property can be let (unless exemptions apply).
Further information and worked examples of the calculations are included in the BEIS guidance.
There are certain circumstances where a landlord can seek an exemption from the requirements:
There is also an exemption when a person becomes a landlord suddenly, due to one of the circumstances below, and it would be inappropriate or unreasonable to be required to comply immediately:
From April 2023, a landlord can also use this exemption if, when purchasing an interest in the property, it was let on an existing tenancy. This exemption lasts for six months.
All exemptions must be registered on a centralised register referred to as the National PRS Exemptions Register (PRS meaning 'private rented sector'). The register service is currently running as a pilot. Landlords who wish to register an exemption for a domestic or non-domestic property as part of this pilot should email the BEIS minimum standards team at PRSregisteraccess@beis.gov.uk.
Landlords can self-certify their exemptions and the register will be monitored by local authorities as an enforcement tool, and also by BEIS to monitor the impact of the legislation. From 1 April 2018 there will be public access to some information, including addresses of properties where exemptions have been registered, names of landlords (except where the landlord is an individual), the nature of the exemptions, as well as valid EPCs for properties.
Exemptions must be registered by 1 April 2018. Landlords will need to have details of the address of the property, which exemptions are to be registered and a valid EPC for the property. Depending on the exemption sought, the landlord will also need any expert advice or reports in writing that provide evidence to support the reason for the exemption.
The EPC for a property can be transferred if the property is sold; however, any registered exemptions will not be transferred and will cease to apply once the property is sold.
Non-compliance with the Regulations, either by letting (or continuing to let after April 2023) a substandard property, or by registering false information on the National PRS Exemptions Register, may result in the issue of a compliance notice or a penalty charge.
A compliance notice may be issued by the enforcement authority where they believe that a landlord is in breach of the Regulations or has been in breach of the Regulations in the past 12 months. The notice must be in writing (either hard copy or electronic) and will request information that will help the authority to decide whether a breach has occurred, including current EPC or any other EPCs held by the landlord, tenancy agreements and energy assessment or improvement reports.
If the enforcement authority concludes that there is evidence of non-compliance, they may issue a penalty notice. There are various options available to authorities and the amount of the penalty is at their discretion:
Authorities may also publicise the non-compliance by adding details to the public area of the National PRS Exemptions Register, including the landlord's name (except where they are an individual), the address of the property, details of the breach and the financial penalty imposed.
BEIS has produced comprehensive landlord guidance documents for each type of property.
Last reviewed / updated: December 2017
This information is intended for guidance; only the courts can give an authoritative interpretation of the law.
The guide's 'Key legislation' links may only show the original version of the legislation, although some amending legislation is linked to separately where it is directly related to the content of a guide. Information on amendments to UK legislation can be found on each link's 'More Resources' tab; amendments to EU legislation are usually incorporated into the text.