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Are UK landlords falling foul of energy efficiency rules going unpunished?

MEES regulations have been tightened from April 2019
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As tighter Minimum Energy Efficiency Standards (MEES) come into force, there are widespread concerns the rules are not being properly policed

It is now over a year since landlords of the most draughty, fuel-poor, energy-wasting homes and offices in England and Wales were told they would have to bring their rental properties up to scratch. Those found breaching the law potentially face fines of up to £5,000, as well as being 'named and shamed' on a public register.

Yet, 12 months down the line, concerns are rife that Minimum Energy Efficiency Standards (MEES) rules are being flouted by some landlords, with properties still being advertised for rent up and down the country which do not appear to comply with the law.

When the legislation came into force last year it was estimated around 300,000 rental properties were not up to Energy Performance Certificate (EPC) standard E or above on energy efficiency, and would therefore need improvements to comply with the regulations. But BusinessGreen has found properties currently being advertised by letting agents online which do not meet these standards for energy efficiency, and there is concern among industry experts that the rules are not being properly enforced by cash-strapped councils.

The UK's building stock is estimated to account for around 37 per cent of the UK's total emissions. If the UK is to meet its legal climate change targets, the Committee on Climate Change has insisted new policy action to address building emissions is vital. In his Spring Statement Chancellor Philip Hammond partly addressed these concerns, announcing plans to ensure all new homes use fossil fuel-free heating from 2025.

But the apparent lack of effective oversight of existing regulations for rental properties has prompted concerns among green figures about the UK's ability to cut emissions from the building sector in line with statutory climate targets. "The rules that are being put in place are good and are to be congratulated, but they have to be enforced," Tim Rotheray, director of the Association for Decentralised Energy (ADE), told BusinessGreen. "There is a lack of renter awareness, and if the landlord is able to get away without doing so, then they may well prefer to do that than spend money on improving the quality of their homes."

Richard Twinn, senior policy advisor at the UK Green Building Council (UKGBC), agreed that MEES enforcement "doesn't appear to be happening because local authorities don't necessarily have the capacity".

"It does appear to be an issue - and it is probably the smaller landlords who are less likely to be compliant," he told BusinessGreen. "For larger institutional landlords with investors behind them it is more of a reputational driver, and they have been expected to comply with this for years."

In the domestic housing sector, the most fuel-poor homes offer the biggest opportunities for carbon savings. But basic improvement measures such as loft insulation and new boiler installations are also the most expensive, which under existing rules means these landlords can often register for exemptions to MEES, Twinn explained.

"At this stage the carbon impacts are not likely to be huge, but setting a precedent for introducing the minimum standards and enforcing them properly could have a very big impact if and when they are tightened up to band C," he added.

What do the MEES regulations say?

Under the domestic MEES regulations, properties rented out in the private sector must have a minimum energy performance certificate (EPC) rating of E or above, effectively rendering new tenancies for the draughtiest homes at levels F and G unlawful since April last year. The rules, aimed at cutting both energy bills and emissions, apply initially to new tenancies or contract renewals, but by 2020 will apply to all domestic rented properties on the market and by 2023 all commercial properties.

To date, though, landlords have been able to apply for exemptions to the MEES regulations. Specifically, F and G rated properties did not have to be brought up to scratch unless improvements could be wholly financed at 'no cost' to the landlord - i.e. unless the property owner could get access to third-party funding to help pay for improvements such as insulation or better boilers.

Since the government withdrew its Green Deal scheme in 2015, however, access to funding for energy efficiency measures has been limited for landlords, increasing the likelihood of securing a MEES exemption - although some smaller measures can still be funded under the Energy Company Obligation (ECO) scheme.

The government has made moves to strengthen the regulations, placing a cap on the exemption rule which means that - as of just yesterday - landlords are now only eligible for a MEES exemption if recommended energy efficiency improvements to a property will cost them more than £3,500.

Yesterday Energy and Clean Growth Minister Claire Perry hailed the newly tightened MEES measures, which she said would affect around 200,000 landlords, potentially saving householders up to £180 per year on bills in addition to helping cut CO2.

The regulations could also be tightened further still in the coming years. The UK's Clean Growth Strategy from 2017 includes an ambition to bring all rental properties up to EPC level C by 2030, although no further concrete details on this proposal have since been released by the government.

'I didn't have a clue'

However, BusinessGreen this week found several properties being advertised online for rent through different agencies with EPC certificates rated at F or G, which would mean these homes fall foul of the law, unless the landlords have registered an exemption. Properties were also found with EPC certificates recommending upgrades that would cost below the £3,500 cap to bring them up to standard, which would likely now render these landlords ineligible for MEES exemptions as of 1 April 2019, and therefore in breach of the law.

energy efficiency epc certificateOne of the EPC certificates found by BusinessGreen displaying a G rating

One letting agent contacted by BusinessGreen voiced surprise that a terraced house advertised on their website showed an EPC certificate rating of just G. The letting agency also said they did not realise the MEES rules were being further tightened from this month to add a £3,500 cap.

"It is [a regulation] which seems to have slipped by quite quietly," the letting agent said. "It's quite a quiet one. I think you'll find a lot of people you speak to will probably say 'oh, I didn't have a clue'."

But the Residential Landlords Association (RLA), which has sought to inform its members up and down the country of the regulations since they were first announced by the government in 2015, said its own research had found 91 per cent of landlords were now aware of their obligations under MEES.

It also claimed more than a third of its members with F and G rated properties could not afford measures that would push the rating up to E, with such landlords reporting it would cost them almost £5,800 on average to bring their properties up to the required standard.

Nevertheless, RLA policy director David Smith conceded it was "concerning" there remained some landlords who did not appear to fully understand their legal obligations.

"No landlord should ever break the law. Our own research shows that whilst the vast majority of landlords understand their obligations in respect of energy efficiency, there remain some who do not," he said. "This is concerning."

To help incentivise bringing homes up to standard, Smith urged the government to ensure any work carried out on a property by a landlord as recommended on an EPC certificate was tax deductible.

"The RLA argues that rather than setting artificial targets for energy efficiency, we need to be more ambitious with a vision to ensure that every private rented home is as energy efficient as possible," he explained.

Are councils enforcing the rules?

The number of properties found for rent online apparently below required standards of energy efficiency has raised serious questions about how well the MEES regulations are being enforced, particularly with the rules having now been further tightened as of yesterday.  

The MEES regulations stipulate that local authorities are responsible for enforcement of the standards, giving councils the power to carry out checks of properties, issue compliance notes to landlords, and potentially even impose financial penalties. Councils can then keep any money raised through fines to spend as they see fit.

A public register of penalty notices issued by councils is accessible online, but numerous attempts by BusinessGreen to search the database via postcode and town failed to throw up any details of a single landlord who had been punished for failing to meet the MEES standards.

BusinessGreen searched the database across London, Leeds, Manchester, Bradford, Newcastle, Bristol and Brighton, without finding evidence of a single penalty notice. The notion that the database is a public register that will 'name and shame' non-compliant landlords - as it is widely described - is also inaccurate, with users having to search by landlord name, postcode or address to return any results. Plenty of exemptions have been registered, however. 

When asked by BusinessGreen whether its members were properly enforcing the MEES regulations, the Local Government Association (LGA) - which represents around 350 councils in England and Wales - declined to offer a comment.

But Twinn from the UKGBC said he "wouldn't necessarily blame" councils for the lack of enforcement, as it has until now been difficult to find out whether or not a landlord has an exemption to the MEES regulations.

Many properties listed for rent online do not automatically provide their EPC rating nor certificate, and there is no requirement for letting agents to state whether or not a property has secured an exemption or not on property adverts, leaving question marks over the quality of information immediately available to prospective renters and council officials.

Things might change with the introduction of the cost cap, he said, which could give local authorities a clearer steer on which properties qualify for an exemption. 

Twinn stressed letting agents and mortgage lenders also have key roles to play in driving down emissions from buildings, but that the UK government needed to develop an overarching framework to set the agenda. Current policy is "falling quite short at the moment, on a number of different fronts", he said.

Despite concerns over the current enforcement of MEES rules, there has been significant progress in bringing fuel poor homes up to higher standards over the past decade. Government data shows the proportion of private rented homes with an EPC rating of F or G has fallen from 22.8 per cent in 2006 to 6.3 per cent in 2017.

The Department for Business, Energy and Industrial Strategy (BEIS) said it was currently funding a series of 12-month enforcement studies throughout 2019 in Bristol, Oxford, Eden, Cornwall, Bewcastle, Liverpool, Cambridge and Peterborough. 

The studies will be used to develop a toolkit to support enforcement of the regulations across England and Wales, and to inform thinking on future energy plans, it explained.

Meanwhile, BEIS said it was also currently developing policy for a 2030 domestic plan for the UK, with a view to consulting on the details later in the year.

BEIS minister Claire Perry said eradictaing fuel poverty was a priority for the govenment, and that the MEES cap introduced this week would "help guarantee a warm home is a right not a priviledge".

"Not only will this mean the rental and energy markets work in the interests of everyone by driving down bills, it will also make a huge contribution to our goal of decarbonising the economy, a key ambition of our modern Industrial Strategy," she said.

 

Measures to reduce the amount of energy wasted in homes can deliver a host of co-benefits, from lower bills, to tackling fuel poverty and cutting emissions, and are therefore widely viewed as among the cost-effective in climate policymaking. However, if even existing regulations are not adequately enforced in the short-term, it undermines the potential paybacks for energy efficiency measures in the long-term - and risks leaving some of the UK's lowest income renters out in the cold.

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