Date Published 24 March 2025
We know that net zero is coming down the line and it will affect almost every area of our life. In a previous article we looked at the consultation on changing the method for measuring energy efficiency for the EPC. In this article we consider the closely related Minimum Energy Efficiency Standards and how they may change for privately rented properties.
Improving the energy performance of privately rented homes in England and Wales:2025 update
This consultation was announced 7 February and closes for responses on 2nd May 2025. We should not be surprised by the headline proposal as this is not the first Government to propose something similar. Again, these proposals for the private rented sector (PRS) are only one part of an overall national strategy to achieve ‘Net Zero' by 2050.
The headline proposal is to raise the minimum energy efficiency standard (MEES) to a C from the current rating of E. This, under current regulations, means that all private rented properties will have to achieve the C rating or have a valid exemption registered before the property can be let. It is not yet clear how any changes to MEES requirements will dovetail with the with the proposed database under Renters' Rights legislation. Would it for instance be a requirement to ensure that a C rating is achieved before the property is let or before it is marketed?
The time scale proposed in the previous administration's consultation, launched September 2020, was to introduce a minimum band C rating for new tenancies from April 2025 with compliance required for existing tenancies from April 2028.Clearly this cannot be achieved now. The then Government did not respond to their own consultation although the present Government has now responded. The proposals in this updated consultation build on or amend earlier proposals.
Time scales
The amended proposal is to introduce the minimum band C for new tenancies from 2028 (no month is stated). The transition period for existing tenancies to comply with the band C is 2030 (again no month stated). Under Renters' Rights legislation, Housing Act 1988 tenancies will be periodic and, as such, tenants will be able to give 2 months' notice at any time. Any following tenancy will therefore be a new tenancy to which the transition period will cease to apply.
This consultation does not end until early May. Typically, Government responses to consultation can take up to 6 months, or longer. Being generous, this will mean that there may be no more than two and half years until that initial compliance date for new tenancies. In recent history landlords struggled to comply with the requirement for PRS properties to have electrical installation condition reports (EICR) because of a shortage of electricians. Compliance with new EPC requirements will, in addition to electricians, need plumbers, builders, window and insultation installers etc. This will come on top of the stretching housebuilding commitments made by the new Government. There may be serious concerns that there will be insufficient numbers of trades people to make the necessary improvements to ‘sub-standard' properties.
The maximum spend
Currently if a property does not meet the current minimum band E then the landlord must spend up to £3,500 including VAT, per property, on relevant improvements listed on the EPC. These might include, additional insulation, new heating controls, double glazing etc. Once the landlord has spent that amount or the improvement cannot be made within this figure then the landlord can register the remainder as an exemption. That figure is out of date now. The 2020 consultation had proposed raising the minimum per property spend for non-compliant properties to £10,000 and the proposal under the updated consultation raises that further to £15,000 including VAT per property. Part of this will be down to inflation, however, the majority is likely to be for the type of improvement required. A property could potentially have been improved from a band E to band D by changing the light bulbs and adding more loft insulation for just a few hundred pounds. Getting a property from band E to band C or higher is necessarily going to require more expensive improvements such as switching from a gas boiler to an electric heat pump or installing solar panels where possible.
If cost and practicality were taken out of the equation, we would presumably want to have the greenest and most efficient systems in all our properties. For a landlord with a single rented property under band C, potentially having to find up to £15,000 may be a stretch. For landlords with multiple properties it will just get harder. On the positive side. As new technologies are developed the cost normally start to come down. The Governments own figures suggest that on average a landlord will have to spend just over £6,000 per property to achieve band C. In this consultation update, the Government has stated that they would consider a new ‘affordability' exemption. They recognise that if the landlord's only genuine option is to sell because the improvements are too expensive, they risk the property being lost to the PRS. They suggest for instance reducing the cost cap to £10,000 where the affordability exemption could apply or linking the exemption to council tax banding or rent levels may be a more proportionate option, though likely to leave less well-off tenants not benefiting from the better energy efficiency and lower bills.
Exemptions
There have been a range of exemptions that a landlord can register for reasons such as, an improvement costing more than the £3,500 or that all the improvements have been made and the property is still below the minimum rating. Typically, the exemptions are valid for 5 years, but they are not transferable to a new landlord. The Government has proposed that the cost cap exemption and an affordability exemption (if adopted) would be extended to a 10 year exemption.
Penalties
Under the current regulations the maximum penalty a landlord may face for a breach of the MEES regulations is £5,000 per property. It would not be sustainable to say to a landlord you have to spend £15,000 or face a £5,000 penalty.
The 2020 consultation had proposed a maximum £30,000 penalty. The Government, whilst acknowledging a high percentage of respondents said they did not agree with the proposal have stuck with the £30,000 maximum penalty, with a 5 yearly review.
The way forward
These proposals would mean that we have a far better understanding of the energy efficiency of our homes. This will mean a more thorough and therefore a likely more costly assessment. Still though, spread over the proposed 10 year lifespan of an EPC, the cost will still be relatively small.
