Energy Act 2011 - additional concerns for landlords

In addition to setting out the legislative framework for the "Green Deal", a scheme enabling businesses and households to have energy saving works carried out to their properties and to pay for them by instalments through their energy bills, the Energy Act 2011 contains two further interesting provisions for landlords.

From April 2016, private residential landlords will be forced to agree to a tenant`s reasonable request for energy efficiency improvements where a Green Deal finance package or an Energy Company Obligation ("ECO") is available. (This is a package covering properties which do not satisfy the "golden rule" for Green Deals that the anticipated reduction in the cost of energy as a result of improvements must be greater than the amount of supplement added to the energy bill to pay for those improvements.) The devil will, as usual, be in the detail when it is published, but there is a real danger that the ECO could result in energy bills being artificially high because of the repayment of the cost of works where those works have not produced a saving to justify them. The effect on rent will clearly be downwards. 

From a date to be announced (but no later than 1 April 2018), it will be unlawful for a landlord to rent out premises (business or residential) which do not meet a minimum energy efficiency standard (intended to be Band E on the EPC scale) unless "all possible" Green Deal measures have been implemented. Again, quite what this will all mean for landlords of difficult properties will depend on the details yet to be settled.

However, landlords, including social landlords often have some units in their housing stock which have not yet reached decent homes standard or equivalent and which cannot economically be so improved.

What will implementing "all possible Green Deal measures" mean for these units? Will the Golden Rule prevent excessive expenditure on energy saving which will make the running costs too high to attract tenants or will ECO payments be available to mitigate this without a commensurate increase in energy bills to repay the cost? Time will tell, but prudent landlords, including social landlords, may well wish to divest themselves of such units now, while there is still a market for the properties in order to mitigate risk. 

Posted on: 16/08/2012

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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