Energy efficiency and condition standards in private rented housing: consultation analysis

Meeting the standard when there's a change in tenancy after 1 April 2019

Landlords already need to have a valid EPC available for a property offered for let when there is a change in tenancy. Under the Energy Performance of Building (Scotland) Regulations 2008 the EPC is valid for a period of up to 10 years, and must be lodged on the EPC register. There are existing mechanisms to enforce this requirement. From December 2017, there will be new tenancy agreements under the Private Housing (Tenancies) (Scotland) Act 2016 and it is proposed that the energy efficiency standard would apply where there is a new tenancy under these regulations. If the EPC assessment shows a Band F or G then the owner would need to take action to comply with the new standard.

The proposal is that the owner of a property in Band F or G would need to have a minimum standards assessment carried out and lodged on the register before the new tenancy begins. The assessment would identify the required improvements (usually to bring the property to an EPC Band E) which should be carried out within six months of the date of the minimum standards assessment. The owner would then have to provide proof that the property is compliant, for example through the production of a new EPC showing the required rating, or evidence that the measures identified in the assessment have been installed.

Question 1.8 - Where a property has an EPC of F or G at the point of rental:

(a) Do you think that we should require the owner to carry out a minimum standards assessment before renting the property out?

(b) Do you think that we should allow a period of six months from the date of the minimum standards assessment to carry out the improvement identified by the assessment?

(c) Do you think that the owner should have to provide a post-improvement EPC to prove that the necessary improvements have been made?

Please explain your answers.

Table 9: Question 1.8a – Responses by type of respondent.

Type of respondent	Yes	No	Don't know	Not answered	Total
Organisations:
Energy-related private sector	4	1			5
Landlord	10	12		6	28
Letting agents etc.	7	3		2	12
Local Authority	16	4	2		22
Other	1			3	4
Professional body	13	3	2	8	26
Third sector	9			2	11
Total organisations	60	23	4	21	108
% of organisations answering	69%	26%	5%		100%
Individuals	40	39	3	8	90
% of individuals answering	49%	48%	4%		100%
All respondents	100	62	7	29	198
% of all respondents	51%	31%	4%	15%	100%
% of all those answering	59%	37%	4%		100%

A majority of respondents, 59% of those answering the question, agreed that the owner should be required to carry out a minimum standards assessment before renting the property out. Overall, organisational respondents were more likely to agree than individuals (69% and 49% respectively). Among organisational respondents, landlords were the only group in which a majority did not agree.

The Shelter Scotland report asked private tenants if they thought the owner should have to carry out a minimum standards assessment before renting the property out. Of the 24 private tenants who answered this question, 22 thought they should and two said they should not.

Around 65 respondents commented specifically on Question 1.8a. Amongst those who agreed with the proposal, a number of respondents qualified their approval as being subject to: EPC methodology being improved; a cap on the landlord's contributions to the cost of the necessary works; the assessment cost being reasonable; and there being enough assessors to meet demand.

Other comments relating to EPCs and Minimum Standards Assessment ( MSAs) included that:

• EPCs produced using early editions of RdSAP will be different to more recent versions and if the lodged version is prior to the current RdSAP 9.92 and RdSAP conventions v9.x, then both a new EPC and an MSA should be required.
• If the EPC is current (as above) then an MSA could be produced from the lodged EPC data, although a site visit would still be needed for the assessor to make reasoned judgements on the applicability of measures for the property to comply with 'E', 'D' and higher banded energy efficiency scenarios.
• A framework, whereby a quality assured EPC can be created by the energy assessor, with suitable evidence from the home added to the original site visit, could ensure EPCs are updated correctly.

With respect to the MSA itself it was suggested that:

• An MSA can be tailored to the property to give an estimated cost for that property instead of using average costs. The MSA should give a clear indication of the work that would be required to reach a higher EPC rating.
• MSAs could be particularly useful for properties that are hard to treat.
• As well as energy efficiency, the assessment should focus on the repairing and tolerable standards.
• Take-up could be improved and impartiality enhanced if resources are made available to reduce (or eliminate) the cost to the landlord. A specific suggestion was that MSAs should be provided free of charge by the Energy Savings Trust. The importance of impartiality was emphasised.
• What happens if a property still does not achieve a band E rating, despite the works being carried out as recommended, must be set out.

It was also proposed that there should be a duty for the landlord to share the assessment with a potential new tenant so they are aware of the work that will need to be completed within the next 6 months and can consider this when deciding whether to go ahead with the lease. If measures set out in the MSA are not implemented, then an action plan could be sought leading to completion of the works within 4 months.

Comments made by respondents who did not agree with the requirement for an MSA included that:

• The EPC already incorporates suggested improvements and is sufficient of itself or could be accompanied by a condition report. It was also suggested that more emphasis should be placed on the building being wind and watertight.
• A minimum standards assessment should be incorporated into an improved EPC.
• An MSA should be optional if an appropriate EPC rating can be achieved without it. It was argued that where the cost of bringing an F or G rated property up to band E is relatively low, an MSA would represent a significant proportion of the overall cost of improvement.

Flexibility was suggested with respect to the timing of an MSA, specifically that it should be permissible to have a survey carried out within a short period of the start of a tenancy. Reasons given for this view included a possible shortage of surveyors.

Other suggestions, made by smaller numbers of respondents, included that consideration should be given to how long the MSA would be valid. General concern about increased costs and the complexity of the process was also highlighted including a suggestion that EPCs are typically more expensive than the £30-60 quoted in the consultation paper. Where EPCs are still in date, it was argued any additional costs should be borne by the Scottish Government.

Question 8(b) - Do you think that we should allow a period of six months from the date of the minimum standards assessment to carry out the improvement identified by the assessment?

Table 10: Question 1.8b – Responses by type of respondent.

Type of respondent	Yes	No	Don't know	Not answered	Total
Organisations:
Energy-related private sector	4			1	5
Landlord	8	11	1	8	28
Letting agents etc.	5	5		2	12
Local Authority	18	3		1	22
Other	1			3	4
Professional body	10	6	1	9	26
Third sector	7	1	1	2	11
Total organisations	53	26	3	26	108
% of organisations answering	65%	32%	4%		100%
Individuals	25	41	14	10	90
% of individuals answering	31%	51%	18%		100%
All respondents	78	67	17	36	198
% of all respondents	39%	34%	9%	18%	100%
% of all those answering	48%	41%	10%		100%

There was no clear balance of opinion at this question. Of those answering the question, 48% agreed that a period of six months from the date of the minimum standards assessment should be allowed to carry out the improvement identified by the assessment. Overall, organisational respondents were more likely to agree than individuals (65% and 31% respectively). Within organisations, landlord and letting agent respondents were the only groups in which a majority did not agree.

The Shelter Scotland report asked private tenants if they thought it was reasonable to allow 6 months for the improvements to be carried out after the assessment. Of the 22 private tenants ^[3] who answered this question, 17 thought it was reasonable and five thought it was not. Their further comments included that councils carry out improvement works when a property is rented, and that the approach allows the tenant to continue living in the property.

Around 75 respondents commented specifically on Question 8.1b. Those who agreed often suggested that 6 months is reasonable, sufficient or fair. However, while some respondents expected 6 months to be the maximum allowed or cautioned that allowing extensions as a matter of course will encourage landlords to take extra time, others suggested that there should be discretion for a local authority to extend the period. Several respondents who agreed also commented that longer may be necessary, including that this should be up to 12 months to allow for issues around a tenant not providing access, or to allow work to be carried out during the summer. Other issues noted as potentially requiring flexibility included: communal works; complex operations such as installation of external wall insulation; and availability of tradespeople in rural areas.

Analysis of Home Energy Efficiency Programmes ( HEEPS) loan scheme data was cited by respondents as having informed their view that 6 months is appropriate, reporting that where loans were provided to cover the upfront costs of improvement measures and their installation, 92% of recipients had measures installed and claimed their loan within 6 months, 96% in 7 months, and 98% in 8 months.

The issue of cost was also raised by respondents who noted their assumption that the MSA would not propose improvements for which the real costs to comply would exceed the maximum capital allowance for this duty (£5,000 for band E ^[4] ), although also that only the landlord investment should apply in the case of an exception for excessive cost.

How these proposals align with the Private Housing (Tenancies) (Scotland) Act 2016 was also queried, and clarification sought on the consequence for the landlord of failure to comply within the 6-month period – including whether the new model tenancy includes grounds for a landlord ending a tenancy in such circumstances.

Concern regarding disruption to tenants was also noted, and it was suggested both that a landlord should be required to inform new tenants of the work to be done in the next six months, and that such work may entitle the tenant to claim a reduction on their rent. An additional suggestion was that tenants should be consulted on timing of work, with students taking exams being mentioned in particular.

Among respondents who did not agree with the proposal, the suggestion that 6 months is not sufficient was by far the most frequently-raised issue. Alternative times proposed included both longer than 6 months (suggested by around 1 in 4 respondents, and 12 months (1 in 6 respondents). Reasons given included tenants refusing access, winter weather conditions, availability of tradespeople, arranging finance, and securing statutory consents as well as the complex nature of some works.

A very much less common view among those who did not agree was that 6 months is too long.

Other reasons given for thinking the proposals unacceptable were that the work should be carried out while the property is empty, including because local authorities do not have the resources to follow up cases where the landlord does not complete the work in the time allowed.

Other comments on Question 1.8b included that where the property is mortgaged, the process should operate in a way that minimises the potential for disruption of the rental income stream that sustains the mortgage.

Question 8(c) - Do you think that the owner should have to provide a post-improvement EPC to prove that the necessary improvements have been made?

Table 11: Question 1.8c – Responses by type of respondent.

Type of respondent	Yes	No	Don't know	Not answered	Total
Organisations:
Energy-related private sector	4			1	5
Landlord	8	12	1	7	28
Letting agents etc.	4	5	1	2	12
Local Authority	20	2			22
Other	2			2	4
Professional body	11	3	2	10	26
Third sector	9			2	11
Total organisations	58	22	4	24	108
% of organisations answering	69%	26%	5%		100%
Individuals	31	40	8	11	90
% of individuals answering	39%	51%	10%		100%
All respondents	89	62	12	35	198
% of all respondents	45%	31%	6%	18%	100%
% of all those answering	55%	38%	7%		100%

A majority of respondents, 55% of those answering the question, agreed that the owner should have to provide a post-improvement EPC to prove that the necessary improvements have been made. Overall, organisational respondents were more likely to agree than individuals (69% and 39% respectively). Within organisations, landlord and letting agent respondents were the only groups in which a majority did not agree.

Around 75 respondents commented specifically on Question 1.8c. Among those who agreed that a post-improvement EPC should be required, comments included that there must be independent verification that the required measures have been implemented and that an EPC is either a good option or the only suitable option. It was also noted that if the property has been upgraded the previous EPC rating will no longer be valid, that any marketing materials for the property will require a current EPC which must also be provided to a tenant at the start of a tenancy, and that there is now a requirement to provide a post-improvement EPC for all loans from Home Energy Scotland or following Warmer Homes Scotland works.

Local authority respondents were amongst those who commented on the need to minimise administrative costs or resources associated with monitoring compliance and it was suggested that searching the EPC register would be an effective option in this respect, placing a duty on the owner rather than expecting a local authority to proactively check up on improvements having been made.

Further benefits identified included that the EPCs will help to provide accurate data for energy databases such as Home Analytics, and to help to identify where improvements have been made and how future improvements can be delivered.

With regard to the additional cost to landlords associated with a post-improvement EPC, suggestions included that:

• This provides an incentive for landlords to improve properties before the initial assessment.
• The EPC should be included in the cost of the MSA with the same assessor returning after the works are completed, so that duplication and administration costs can be minimised.
• As an incentive for early compliance, improvements carried out within 3 months of the MSA could attract a free EPC.
• The cost of assessments could be included in the proposed cost cap on the amount a landlord has to spend to improve a property.

Other suggestions made regarding post-improvement EPC included that the EPC should be adapted to include a 'compliance with standards for private rented housing', including a section for further information regarding any exemptions or exceptions and a time frame for this.

Finally, among those who agreed with the requirement, it was suggested that, if an EPC is not required, consideration should be given to use of alternative evidence that required improvements identified by an MSA have been implemented. The recommendation of the Each Home Counts Review were highlighted, with particular reference to the development of a Data Warehouse and an Information Hub which would allow consumers to access information on what measures have already been installed in their property.

Among respondents who did not agree that a post-improvement EPC should be required alternative suggestions made included:

• The EPC rating should be checked at the next renewal date.
• EPC providers should be able to reissue a revised certificate, at reduced cost, rather than carrying out a complete reassessment.
• The EPC certificate should be provided as part of the MSA process.
• It should be sufficient to provide proof that the improvements identified in the MSA have been installed. Evidence suggested as suitable included detailed quotes, matching invoices, and evidence these have been paid. This approach was noted as consistent with recommendations for work required under an Electrical Installation Condition Report.
• Self-certification should be sufficient.
• A document from whoever carried out the upgrade work stating that it was done to the appropriate standard as detailed on the existing EPC. It was also suggested that installers could be licensed/registered to do this, although it was acknowledged that this would require policing.
• A new EPC should only be required when there is a change of tenancy.

As at many other questions, respondents also expressed doubt in the ability of the EPC to accurately reflect work carried out, and questioned what value a new certificate would have if this is not resolved.