The Energy Efficiency (Private Rented Property) (Scotland) regulations 2020: consultation analysis

Exemptions

The first question sought opinion on the level of information provided on exemptions to the regulations. The level of information was high in the 2017 consultation. In that consultation views were sought regarding situations where it might be appropriate to accept a lower standard for certain properties within the private rented sector.

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.

39 respondents answered Question 1. The majority of respondents supported the principle of exemptions but also thought that the information provided did not provide the level of direction needed to understand how to meet the standard or seek an exemption.

The responses have been grouped under broad thematic headings to assist in understanding both the general, and more detailed nature of comments received.

Principles behind the regulations and exemptions

Flaws with EPC – some respondents are opposed to the use of the EPC, which forms the underlying basis of these regulations, as a measure against which properties should be judged. This opposition is particularly voiced in relation to historic and traditional properties.

A small number of respondents claim EPC assessors are lacking in knowledge regarding historic properties, and this is further compounded by inexperienced tradesmen who are delivering grant works.

Respondents report that on occasion, EPC recommendation reports do not propose works to get to the standards required by the regulations which a small number of respondents felt, would cause confusion on what action a landlord should take. It was further suggested by respondents that EPC recommendations can conflict with goals to reduce greenhouse gases.

Finally, a small number thought the EPC register a cumbersome tool for enforcement authorities.

Time to implement the changes – a small number of respondents supported the principles but considered that more time should be allowed to implement the necessary changes. They based this consideration on existing problems and limitations within the supply chain. In particular this was felt to be the case where highly disruptive works are needed and may take longer to implement. Respondents felt such occasions should be given additional time to meet the standard.

One suggestion proposed related to agreeing more time to implement the standards if the landlord has an agreed programme of improvements covering a large portfolio.

Impact of the regulations - a small number of respondents considered that the regulations could result in rural properties being removed from the Private Rented Sector after purchase by owner occupiers.

It was suggested that where a landlord gains an exemption and the property remains below the required standard the tenant should be entitled to some form of compensation.

Finally, it has been suggested that the impact of allowing exemptions may focus landlords on working around the standard, thus causing an administrative burden for the enforcement authorities and resulting in no real change to the quality of the housing stock.

Enforcement – Some respondents have raised a general point regarding the enforcement of the regulations seeking guidance on the evidence required to support each exemption category. They also sought guidance on how information would be verified, how long exemption would last, and the timings for temporary exemptions. This point linked with concerns raised regarding the potential for inconsistency across Scotland if each local authority interprets the regulations in a slightly different way.

A number of local authorities were concerned about the impact on their workload and one urged for a co-ordinated approach lead by Scottish Government to help target the worst properties first. The use of a common template supplied to the enforcement authorities by Scottish Government was supported by another local authority.

Clarity – One local authority has suggested a suite of leaflets to assist in the understanding of the regulations as follows:

1. 'The new Energy Efficiency Standard in the Private Rented Sector and your obligations as landlord

2. Private landlord notification of energy efficiency improvements with the local authority

3. Costs of energy improvement, professional advice and exemptions

4. Fine and penalties for non-compliance of the new Energy Efficiency Standard in the Private Rented Sector'

Local Authority respondent

Another respondent raised the need for clear information to be developed for tenants regarding their tenancies and the position regarding properties which are in breach of the regulations. This is mentioned in Regulation 10, but it was not felt that this had been made appropriately clear.

Definitions used

Scope of regulations – clarity is sought regarding a number of issues relating to the scope of the regulations, as follows:

• the suggested use of the definition provided in the Energy Act 2011;
• that wording clarifies that the regulations apply where there is a requirement to have an EPC under EPBD (Energy Performance of Buildings Directive);
• that the regulations clarify the need to reach the standard prior to the signing of a tenancy;
• that it is not just properties in Band F and G affected, but also those in Band E since they will be also affected;
• that the position for properties which do not have, and never have had, an EPC be made clear;
• that clarification is provided for properties who have an EPC which is older than 10 years and does not need to be renewed for the purposes of the Energy Performance of Buildings (Scotland) Regulations 2008;
• that the applicability of the standard to houses in multiple occupation be made clear;
• that any links to the Repairing standard are set out, as there seems to be an inference in the guidance that these regulations form part of that;
• that the position for tenancies on agricultural holdings and the standard they will have to reach when they become part of the PRS is clarified;
• that clarity is provided on who is responsible where existing contractual leases are in place, particularly so with sub-letting within tenancies on agricultural holdings; and
• that the guidance is clear on the position for existing tenancies of sub-standard properties which seem to be able can continue after April 2020, although the regulations do not seem to provide for the continuation of such tenancies.

Other definitions – some respondents have sought further clarity on a number of defined terms used within the regulations and guidance, as follows:

• one respondent has suggested the term cost cap should be defined as 'where the cost of works to achieve the new standard are likely to exceed or are actually greater than £5,000 per property. This is known as the 'cost cap'.
• It was noted that the term 'installer standards' used in regulation 8 but not defined elsewhere in the regulations. This is particularly relevant when cross checking against the measures listed in Schedule 1;
• Respondents sought clarity on the term 'reasonable effort' in Regulation 11 and not defined elsewhere in the regulations, perhaps aided by some worked examples; and
• The term 'independent' and what constitutes independence as all may not be adequately skilled on understanding all forms of building type.

One local authority suggested referencing the need for building warrants for certain works this being important for working out the timescale for completion of works.

Regulation 8

Clarity was sought by a small number of respondents regarding what is 'relevant' and how regulation 8(1)(a) links to schedule 1. This clarity should be carry into the guidance so that it is clear to the reader what constitutes a relevant energy efficiency improvement.

In terms of who can provide the evidence listed at 8(1)(b)(iii) clarification has been sought by some, with a number of suggested additions proposed as follows:

• an EPC assessor and/or;
• relevant person;
• other expert;
• a definition of surveyor (if charter, or to include anyone who has carried out a survey of the building); or
• a qualified professionals (particularly for historic buildings).

The nature and complexity of the reports was also questioned, including the need for clarification if a landlord is dealing with properties that each require a report, with the suggestion on cost grounds that it be possible to submit a common report.

In terms of the evidence to support this regulation one respondent raised that the use of the term Green Deal risks becoming outmoded. The respondent went on to consider how the Green Deal report is defined, noting that several pieces of legislation are cross referenced, thus making it very difficult for the reader to understand. Linked to this are the limitations of the Green Deal Advice Report identified by a small number of respondents.

There was some confusion over the exemptions which would apply to listed and historic buildings. Whilst these are set out at regulation 8(2) the wording is considered by some to be ambiguous, particularly in regard to works which would have a potential negative impact on the fabric of the building in question. One respondent seeks further clarification of wording that this may be in the short, medium and/or long term and is not restricted to immediate damage.

In terms of the guidance around this regulation, it is suggested that additional information be supplied regarding the change management process for historic environment designations and the respondent has supplied suggested wording accordingly. A web link has been provided to include in FAQs to assist.

In terms of support and guidance to assist in this regulation, concern has been expressed regarding the ability of Home Energy Scotland (HES) to provide this service.

In terms of the related recommendation report, it is noted that the guidance should clarify that the list of measures are not comprehensive and also that the measures should not be assumed to be appropriate in every case.

It was suggested that natural heritage or landscape designations which may preclude certain works, such as wind turbines, should be mentioned.

Clarity was also sought by a small number on the matter of availability of funding listed in regulation 8(3), and, in the event that this is not forthcoming, whether this would then become a further exemption.

In terms of clarity on this regulation It has been suggested that the wording which relates to exemptions based on measures not being relevant should be moved to Part 3.

Finally, the need for section 8(2) is questioned, as if a measure is not contained within the list of documents set out in 8(1), they are by definition, not relevant.

Regulation 9 – relevant energy efficiency improvements undertaken

Similar to a point raised above, it is noted that this regulation provides scope to seek an exemption, but it is not clearly framed as such, and it is suggested that this also be embedded in Part 3 of the Regulations.

Regulation 11 – consent exemption

The view was expressed that tenants should not be able to block improvements being undertaken. However, a small number cautioned against this exemption as it may result in the risk of intimidation of tenants where landlords are seeking an exemption based on this regulation. An additional part to this exemption was suggested where a tenant refuses access to an EPC assessor where the current EPC is older than 10 years.

A small number of respondents felt landlords should provide clear information to tenants on the nature and timing of proposed works thus ensuring they have the best available information on which to base their decision in advance of seeking any exemption. A further suggestion included the provision of mediation services to ensure the tenant understands what is being asked, and also to ensure that they are not being intimidated.

A small number of respondents asked for more clarity on when exemptions would lapse, this being assumed to be at change of tenancy. In the event of a 5 year exemption, the apparent conflict with regulation 11(1)(b) which cites 5 years preceding the exemption as a measure to be used was highlighted. Related to this point, a small number of respondents also felt 5 years was excessive as the tenant may have changed, the suggestion was made to reduce this period to 3 years with a check at point of renewal of landlord registration.

Some respondents referenced the Housing and Property Chamber First Tier Tribunal as the place where disputes, notably those relating to access, should be taken. It was suggested that evidence of this process could be a way to seek an exemption under Regulation 11. Respondents considered this to be particularly true if there is indeed a formal link between these regulations and the Repairing Standard. Some noted that this would provide the tenant with some security.

Some respondents asked for further clarity on the requirement for third party consent (regulation 11(1)(c)) in the event of a jointly owned block where other owners may be required to provide evidence that they do not wish works to be carried out. It was felt this could also be an issue where jointly owned blocks are the subject of a programme of works by a RSL (or similar) but which fall outside the timeframe proposed by these regulations.

Regarding third party consent where this relates to formal consents, a small number of respondents asked for additional explanation of what that includes, making reference to listed building consent and planning permission amongst other concerns.

Some also noted the need for careful consideration of long and invasive works being used as a reason for eviction and sought clarity on what protections would be put in place regarding this. This was also true of costs (including fines) being passed on the tenants through rent increases. A small number suggested the use of a formula based on the cost cap, as used in the Scottish Government's application for exception for landlords in rent pressure zones could be used to prevent this.

Regulation 12 – cost cap

Some sought further guidance as they felt the current wording does not make it sufficiently clear that works should be carried out up to the value of the cap (£5k) They felt this further conflated in the wording of the guidance at 4.3.1 which implies that works should be undertaken up to the cap – without any cross referenced wording in the regulations to support this. This was also felt to be the case where the list of recommended works includes a number of improvements which individually cost less than £5K but together come to more than £5k. Clarity is sought on how the landlord would decide which out of the list of measures they should undertake. Finally on this point, clarity was also sought regarding a scenario where the list of recommended measures does not include any which cost less than £5k. Would the landlord, then have to spend anything?

A small number considers that the requirement is to spend up to £5K on each property, to be excessive where a landlord holds a large portfolio. In such cases, a longer period to comply should be considered. It was also considered not clear if costs spent to reach B and E would then count towards a cost cap exemption for Band D. Further, a small number sought clarification on a scenario where a landlord spends up to £5k in an effort to reach band E but fails to do so, would they then be expected to spend another £5k, knowing that they will not be able to reach Band D.

Within the £5k, some sought clarity on precisely what is included:

• specialist surveyor costs including where the landlord is tackling a number of similar properties which will require surveyor reports – is there a need for a separate report per property;
• VAT;
• impact of any grants;
• redecoration and making good; and
• ancillary wiring, plumbing, etc.

A small number asked for more guidance to explain the practicalities of seeking an exemption and the evidence that should be supplied to the local authority with the need for 3 estimates considered to be excessive.

Regarding the practical application of the cost cap exemption, further guidance was sought to clarify the position where a spending programme over several years was undertaken. In such an instance respondents reported confusion in understanding which costs, over which period, would count towards the exemption being sought.

One local authority suggested that the cost cap is too low, given the support, both advisory and financial, which is available.

A small number did not support the principle of any cost cap, as properties which do not generate sufficient income to allow proper investment and maintenance should not be seen as viable within the PRS and should be sold, thus removing the worst properties from the sector and releasing more properties on to the market.

A small number also considered that the cap of £5K is excessive, particularly where landlords have a large portfolio, or hold several older properties which will all require work, and suggests this be reduced to a cap of £3,500. Alternatively, it is suggested that the cap be reduced in the event of below market rents. A further alternative seeks a review point of the £5k cap to account for inflation in the future. Finally one respondent suggested using a case by case approach.

Regulation 13 – temporary exemption

A small number of respondents felt this regulation was confusing and some simplification or clarification was sought. A suggested alternative was proposed based on a one year clock starting at change of tenancy (subject to the exemption listed at regulation 11) similar to the system used for Residential Energy Conservation Ordinances (RECOs).

One organisation consider regulation 13(3) does not provide sufficient time particularly where the landlord has acquired a number of properties at once. Suggested alternative wording is supplied as follows:

'6 months or such longer period as may be agreed between the landlord and the relevant local authority'.

Organisations - other

Regulation 13A

A small number of respondents were confused about the purpose of this regulation, why it is time bound, and why it does not include the period 1/4/20-31/3/22. Also it was felt unclear if this regulation applies in the event of an existing tenant signing a new contract rather than extension to an existing one.

Regulation 16

One organisation noted that the list provided does not include reference to Regulation 9 which they consider to be an omission. Another organisation asked if the register will be publicly available online.

Schedule 1

A small number of respondents noted that having a schedule/list does not allow for innovative and new measures. However, given the existence of the list, one respondent considers it would be useful to include it within the guidance to ease of reference. A number of detailed suggestions are provided by a small number of respondents, which although not providing a commentary on the regulation, are helpful in future reviews of the schedule.

Omissions from the Regulations and Guidance regarding exemptions

A small number considered there would be a need for financial support to help implement these regulations. They felt this support could take the form of interest free loans instead of grants which should be reserved for the most in need.

It was commented that there appeared to be an omission in the regulations regarding the impact on protected species which is mentioned in the guidance as a possible exemption. A further omission was suggested where the guidance provides information on properties which are to be demolished but this is not referenced in the regulations.

Other omissions or comments regarding the Guidance

It was felt that in the introduction, more information should be included to assist the reader to understand the benefits of energy efficiency. The benefits of going beyond the required standard could also be clarified at this point.

In terms of encouraging landlords to reach a higher standard, some practical detail could assist the readers understanding of what is likely to be required.

Regarding compliance, one respondent felt it would be useful to explain the relationship between the compliance notice and penalty notice and set out how the fines will be applied to ensure landlords cannot ignore certain steps in the process to advantage themselves financially.

Finally, it was not felt clear from regulations or guidance what happens to the property at the end of the enforcement process, or at which point the works have to be undertaken to raise the standard of the property, although this is implied in the FAQs.