Energy and Property

Buildings are to become more energy efficient under the Energy Act 2011. Currently, a quarter of the UK’s carbon emissions comes from the energy used in homes and our businesses, industry and workplaces. The Act is a first step in the legislative programme to make the UK more ‘green’. The Department of Energy and Climate Change (DECC) says the Act “provides for a step change in the provision of energy efficiency measures”, and makes improvements to our framework to enable and secure low-carbon energy supplies and fair competition in the energy markets.

The EPC

Energy Performance Certificates (EPCs) are the present tool used to give information on how to make buildings more energy efficient and reduce carbon dioxide emissions by comparing current levels with potential figures that the building could achieve. EPCs contain a recommendation report with suggestions on how to reduce energy use; you are not obliged to act on the recommendations. However, it would be wise to start acting now as it will soon be compulsory for all homes and buildings to reach a minimum level of energy efficiency, as outlined below under the main provisions of the Energy Act 2011. As a result, the demand by consumers for energy efficient means will soon soar and prices for implementing these will no doubt increase.

All homes constructed, bought, sold or rented at this time require an EPC, as do all commercial buildings when commercial premises are sold or let. The EPC is valid for ten years. Currently, only public sector buildings over 1,000 square metres are required by law to display the certificates. However, display energy certificates (DECs) may soon be mandatory for all private sector business premises under the raft of subordinate legislation that is expected following the new Act.

Energy Act 2011 – Main Provisions

Green Deal - creates a new financing framework to provide for fixed improvements to the energy efficiency of households and non-domestic properties, funded by a charge on energy bills that avoids the need for consumers to pay upfront costs. The scheme therefore provides householders, private landlords and businesses finance upfront to make energy efficiency improvements. The intention is to reduce carbon emissions cost effectively by revolutionising the energy efficiency of British properties.

Private rented sector - from April 2016, private residential landlords will be unable to refuse a tenant's reasonable request for consent to energy efficiency improvements where a finance package, such as the Green Deal and/or the Energy Company Obligation (ECO), is available. Provisions also provide powers to ensure that from April 2018, it will be unlawful to rent out a residential or business premise that does not reach a minimum energy efficiency standard. The intention is for this to be set at EPC rating 'E'.

Energy Company Obligation - the Act amends existing powers to enable the Secretary of State to create a new Energy Comapny Obligation that will take over from existing obligatioins to reduce carbon emissions, which expire at the end of 2012.  This will work alongside the Green Deal by targeting appropriate measures at those households likely to need additional support - in particular those containing vulnerable people on low incomes and in hard-to-treat housing.

Result

Government estimates show that at least 682,000 properties will need improvements but the timescales of the new legislation will enable most owners and landlords to take advantage of the Green Deal to undertake the necessary work. These increased financial incentives should in any event make energy efficient property improvements more attractive. Clear guidelines should soon be given on how the regulations on privately rented property will work once introduced in 2016 and 2018. In any event positively encouraging energy performance in existing buildings is crucial. Although EPCs are now required for all property dispositions, there is no minimum level of energy efficiency to achieve and the report contains recommendations only. The Energy Act 2011 therefore marks the beginning of a credible strategy to reduce energy demand and relieve the environmental impact of property.

This article is written by Fiona Lumsden.  Fiona is a Trainee Solicitor of Lester Dominic Solicitors.