New Government legislation on the energy efficiency of buildings will have a major effect on the private rented sector and has the potential to bring down residential property values.

Worst case scenario, private landlords could be left with unlettable premises under terms of the Energy Act 2011.

Implications of the new Energy Act 2011

The Act, which has received Royal Assent, will make it unlawful for private landlords to rent out an apartment or house with F and G rated Energy Performance Certificates after April 2018. This means landlords need to act now to avoid significant improvement costs in the future. The government estimates that nearly 700,000 rented homes in the UK will need to be improved.

In addition, from April 2016, private residential landlords will be unable to refuse a tenant’s reasonable request for consent to energy efficient improvements when a finance package – the soon to be introduced “Green Deal” for example – is available. The Green Deal will ensure that the cost of improvements is spread across energy bills and not payable by the consumer up front.

Landlords advised to act now and mitigate risk

Stephen Richards, Director in our Property Management team said the degree of risk attached to F and G rated properties was high, and would get higher as the 2018 deadline approached.

“Landlords need to be responding to this legislation now, and be identifying which of their properties are at risk of falling foul of the law and putting a plan in place to improve the future environmental performance of their properties,” he said.

He added: “Although 2018 may seem a long way off, the potential effect on property values, and therefore rents that can secured, will fall a long time before the deadline. Statutory compliance costs could be very high if work isn’t done to improve environmental performance. Far better to identify the reasons for poor performance and carry out efficiency improvements earlier rather than later, or during routine maintenance.

“It’s also important that landlords of D and E rated buildings don’t get complacent. Falling values will affect them too over time as regulations get more stringent. Landlords should act now to secure the highest possible energy rating.”