The Energy Efficiency (Private Rented Property) (Scotland) Regulations 2019: consultation

Introduction

In 2017 we consulted on proposals to improve the energy efficiency and condition standards of privately rented housing in Scotland^[1].  This consultation explored:

• the need for setting minimum energy efficiency standards in private rented housing;
• set out the proposed scope of minimum standards;
• looked at how the standard would work at the point of rental, and at a date by which time all properties would need to meet the standard;
• set out proposals for raising the minimum standard over time;
• explored what would be needed in a new assessment to support the introduction of standards;
• and sought views on the impact of these proposals.

Informed by this consultation, the Energy Efficient Scotland Route Map confirmed our intention to bring forward regulations based on Energy Performance Certificates, requiring landlords of privately rented homes to meet minimum EPC standards from April 2020.  Initially minimum energy efficiency standards will be introduced under Section 55 of the Energy Act 2011, and will require landlords of privately rented homes to ensure their properties achieve EPC Band E from 1 April 2020 at a change of tenancy, and then EPC Band D from 1 April 2022 at a change of tenancy.

In May 2018^[2] we asked further questions to develop our thinking on the private rented sector and the draft regulations and guidance presented here have been informed by that. This consultation develops the approach informed by that and sets out the draft regulations and draft guidance which will then be laid in Parliament after the Summer recess subject to securing a suitable Parliamentary timeslot.

Why are we consulting?

Whilst there is no formal requirement to consult on this final stage in the process. through this consultation we are seeking to raise awareness of the standards proposed and the means by which they will be introduced in advance of formal parliamentary consideration of the regulations to follow later this year.  We are also seeking views on the nature of the guidance to support the Regulations and ensure that users are confident that sufficient information is available to them to begin implementation of the standards required.

Energy Efficiency (Private Rented Property) (Scotland) Regulations 2019

The Energy Efficiency (Private Rented Property) (Scotland) Regulations 2019 (Annex A) make provision for the introduction and enforcement of minimum standards of energy efficiency within the Private Rented sector.

The Draft Regulations are designed to tackle the least energy-efficient properties in Scotland, those with an EPC rating of F or G on their Energy Performance Certificate (EPC). At present there are 23,000 PRS properties below EPC ‘E’ (9% of total PRS properties) with 83,000 below EPC ‘D’ (24% of total PRS properties).  The Draft Regulations establish a minimum standard of EPC band E for domestic private rented property, affecting new tenancies from 1 April 2020 and all tenancies from 31 March 2022. Similarly, from 1 April 2022 the landlord must not let the property unless the EPC is minimum of D. By 31 March 2025 all PRS properties will need to have an EPC rating of at least a D.

The Draft Regulations require that these standards must be met at the prescribed dates or have a valid exemption at the start of the tenancy.

The Draft Regulations propose the use of Energy Performance Certificates as the measure for this standard and sets out the process of identification of the relevant required improvements to reach that standard (Part 2).

The Draft Regulations allow for exemptions and set out the details of this at para 11-13 (Part 3) and relate to consent, cost and other temporary exemptions which may occur in certain circumstances.

Local authorities will enforce the regulations (Chapter 4) and as part of this will hold an exemptions register (Schedule 1). Powers to gather information to support the work being undertaken by Local authorities may be done through the serving of a Compliance notice (para 17).

The Draft Regulations allow for the serving of a penalty notice (Chapter 5) which imposes a financial penalty, a publication penalty or both. Such penalty notices can be the subject of an appeals process (Chapter 6).

Energy Efficiency (Private Rented Property) (Scotland) Guidance

To support the implementation of Regulations, we are seeking views on draft guidance (Annex B) which is intended to assist the reader to understand the requirements of the Regulations.

The guidance provides advice and supplementary information to both landlords, as those seeking to implement the regulations as they affect their properties, and local authorities, as the key bodies implementing and enforcing the regulations.

Key topics addressed within the guidance include:

• how the Regulations apply to domestic properties including those properties which are within the scope of the Regulations;
• the standards which are required;
• the costs of attaining the standard, including cost caps for the works;
• exemptions to the standards;
• the role of local authorities in monitoring and recording exemptions, and compliance; and
• enforcement, penalties and appeals.

Questions

Exemptions

In the 2017 consultation we sought views on situations where it is appropriate for a lower standard to be acceptable for the private rented sector.  The draft regulations set out proposed exemptions (Regulations 11-13) which are expanded in detail in the guidance at chapter 4.

Question 1

Do you think that the proposed approach to exemptions both within the Regulations (Regulations 11-13) and amplified in the Guidance (Chapter 4) provides you with sufficient clarity on meeting the standard or seeking an exemption to that standard?

Please set out the reasons for your response.

Doing the work

There is currently a range of support to help private landlords and tenants to improve the energy efficiency of their properties and reduce their fuel bills. In terms of financial support from the Scottish Government this includes:

• Home Energy Scotland (HES)^[3] makes interest free loans of up to £15,000 available to private sector households to support installation of energy efficiency measures. Loans are available to owner occupiers, with private landlords also eligible to borrow to fund measures in a maximum of 3 properties.  Up to 25% cashback has been available on loans for most energy efficiency measures.  In May 2017, the loan was combined with renewables for a more cost-effective and streamlined process for householders wanting to install both energy efficiency and renewable measures. Further information is available by calling Home Energy Scotland on 0808 808 2282.
• Resource Efficient Scotland SME (Small and Medium Enterprises) Loans^[4] Scheme provides interest free loans of £1,000 to £100,000 to Scottish businesses that fall within the European Commission definition of SME (including private sector landlords) to finance the installation of energy, resource and water efficiency measures.  Further information on RES SME loans is available by calling 0808 808 2268.
• Home Energy Efficiency Programme for Scotland (HEEPS) Area Based Schemes (ABS)^[5] gives interest free loans to support householders pay their contributions towards the cost of grant funded insulation measures delivered through the Scottish Government’s Home Energy Efficiency Scotland (HEEPS) Programme.  Local authorities select priority areas for delivering programmes and can supply further information if needed.
• The HEEPS Equity Loans Pilot^[6] is currently available to homeowners or private rented sector landlords in eight local authority areas (Perth and Kinross, Stirling, Dundee, Glasgow City, Inverclyde, Renfrewshire, Argyll and Bute or the Western Isles), we will look to expand availability to other local authority areas going forward. HEEPS Equity Loans enable householders to make energy improvements and repairs to their properties.  Funding is borrowed against the asset value of the property and there are no ongoing repayments.  The householder pays back what they've borrowed when they sell the property or when the last applicant for the loan is deceased.
• Warmer Homes Scotland (WHS)^[7] provides interest free loans to support eligible householders with their contributions towards the cost of grant funded energy efficiency measures being delivered through the Home Energy Efficiency Programmes WHS programme.  The maximum amount for WHS loans has been increased from £5000 to £10,000 to help support new renewable measures which have been added to the scheme. It is targeted at the most vulnerable households and helps install energy efficiency and renewable energy measures.  Further information on Warmer Homes Scotland is available by calling Home Energy Scotland on 0808 808 2282.
• As well as funded support, private sector landlords and tenants can get free and impartial advice^[8] from Home Energy Scotland (HES) on energy saving, renewable energy and access to funding, including access to schemes provided by the UK Government.  HES can direct people to loans and grants, as appropriate, and more information can be found online or by calling 0808 808 2282.  The Resource Efficient Scotland (RES) programme, funded by the Scottish Government, offers free, specialist advice and support to businesses to implement energy, resource and water efficiency measures that will reduce carbon emissions and translate to cost savings.

As we introduce these regulations we propose to introduce new tailored financial support based on loans for the Private Rented Sector. (Regulation 8 and section 3 of guidance).  We are keen to understand how such an incentive might help improve the energy efficiency of properties in the private sector.

Question 2

What are your views on the existing mixed nature of support (financial and advice) available to landlords and tenants?  Include any additions or changes you think would assist.

Question 3

How would the changes you suggest influence the speed with which you would expect improvements to occur?

Cost Cap

Regulation 12 proposes an exemption based on the cost of the recommended measures - a cost cap.  The regulations would not apply if the cost of making the relevant energy efficiency improvement to the property to increase the EPC rating exceeds:

(a) £5,000 in respect of the period from 1st April 2020 to 31st March 2022; and

(b) £5,000 in respect of the period after 31st March 2022.

We do, however, understand that landlords may seek to implement improvements earlier or on a rolling basis.  Where this is the case landlords will wish to have these measures, and their costs, taken into account once the regulations come in to force.

Question 4

How long in advance of the regulations coming in to force should local authorities take account of expenditure outlay on measures which are intended to meet the standards set, and what information would you expect to provide to local authorities to seek an exemption based on the cost cap proposed.

Enforcement and fines

The standard will apply to privately rented properties covered by the repairing standard.  This standard will be enforced by Local authorities. Primary legislation provides us with the parameters of any civil fines which may be applicable in the event of non-compliance and it will be at the discretion of the local authority to set the level of fine within these parameters, and carry out the enforcement work. Within these parameters, we propose (Regulation 20 and section 5.3 of the Guidance) a breakdown of:

• a financial penalty not exceeding £2,000 and the publication penalty where the breach is less than 3 months;
• a financial penalty not exceeding £4,000 and the publication penalty where the breach exceeds 3 months;
• where a landlord provides false or misleading information in connection with the compliance notice set out in regulation 16(2) a financial penalty not exceeding £1,000 and the publication penalty
• where the landlord fails to comply with the compliance notice in breach of regulation 17(4) the penalties are a financial penalty not exceeding £2,000 and the publication penalty

The limitations of the maximum financial penalty are set out in the Energy Act 2011 and must be no more than £5,000.  However, the Regulations can break down this total to best fit with our intentions to achieve compliance and improvement under the Regulations.

Question 5

What are your views on the proposed penalties, in terms of the impact they will have on achieving compliance with the Regulations and ensuring the completion of carry out improvement works across the Private Rented Sector.

Impact Assessments

An Equality Impact Assessment, Child Rights and Wellbeing Impact Assessment, Fairer Scotland Assessment and Island Proofing Assessment are available on the Scottish Government website.

A Partial Business and Regulatory Impact Assessment has previously been published. You should refer to the Partial BRIA at this time.

A Final BRIA will be published to support the laying of the Regulations in Parliament

It has been determined that the following impact assessments need not be progressed for the topic of this consultation:

Strategic Environmental Assessment
Privacy Impact Assessment