The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (the Regulations) were passed on 26 March 2015. Under the Regulations, from 1 April 2018 landlords will be prohibited from granting tenancies of buildings with an EPC rating of below E unless they can show that a specified exemption applies. The approach of this deadline has moved energy efficiency matters up many landlords' agendas.
Tenants are also increasingly aware of both their green credentials and their expenditure on energy, and in some cases it is the tenants who are pushing landlords to provide more energy efficient space.
However, carrying out energy efficient improvements is not always as simple as it should be. This is particularly the case in multi-occupied buildings. The major issues stem from the fact that the legislation has been drafted upon assumptions that do not ring true in a landlord/tenant context.
Tenant of domestic premises wants to make improvements within its demise
A tenant with a long leasehold interest in part of a building may wish to make improvements to its property so as to reduce its energy bills. From 1 April 2016, a landlord has not been able to unreasonably refuse consent to a request from a tenant of domestic premises to carry out energy efficiency improvements. Such improvements must be capable of being fully financed at no cost to the landlord. There are various circumstances in which a landlord's refusal of consent will not be considered unreasonable.
However, the Regulations have been drafted on the assumption that an individual tenant wants to carry out improvements within its demise. This is unlikely to be the case. Works that can be carried out wholly within the demise and which will improve the energy efficiency of the premises ie the installation of a more efficient boiler, are likely to be permitted without the landlord's consent.
The Regulations really need to be amended following the government's decision to end funding via the Green Deal. Perhaps the government will use this as an opportunity to review the provisions relating to tenants' energy efficiency improvements so they better reflect the reality of the circumstances in which tenants want to carry out energy efficiency improvements.
Tenant wants to make improvements outside its demise
The extent of a tenant's demise will vary from case to case. However, the freeholder will always retain the structure of the building, the roof and the common parts ie hallways and stairs. The leasehold interest will, in some cases, include the windows; in others it will not.
Most improvements will require works to those parts of the building owned by the freeholder and, therefore, the tenant will need to obtain consent to any works.
The landlord's consent is by no means a certainty. It will depend upon a number of factors, including whether the landlord considers that the works will improve the investment value of the building, and how much inconvenience it foresees the works causing.
Landlord wants to carry out works within a tenant's demise
In the absence of rights reserved in the lease, there is nothing to oblige a tenant to consent to a landlord entering its property to carry out works. The rights of a landlord to enter a tenant's property are usually restricted to works of maintenance; not works of improvement.
Landlord wants to carry out works to the common parts
Whilst a landlord will be able to carry out works to the common parts, whether the landlord can recover the costs involved will depend upon the drafting of the lease. The landlord of a residential property will be constrained by the statutory regime in relation to the control of service charges under section 20 of the Landlord and Tenant Act 1985.
Increasing the energy efficiency of our buildings is not as straightforward as it may originally seem. In the landlord/tenant context, the fact that the party making the energy improvement will not necessarily benefit from it, coupled with difficulties with rights of access to carry out the works, are both major hurdles.
It is likely that, in order to operate effectively, amendments will be needed to the current legislation to take account of practical issues which will otherwise thwart the implementation of energy efficiency improvements.
Contributor: Alexandra Holsgrove Jones
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.