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

Enforcement and fines

The regulations will apply to privately rented properties covered by the repairing standard^[3] and will be enforced by local authorities. Primary legislation provides us with the parameters for enforcement measures and the use of civil fines which may be applicable in the event of non-compliance. 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 and proposed the following:

• 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 17(2) a financial penalty not exceeding £1,000 and the publication penalty; and
• where the landlord fails to comply with the compliance notice in breach of regulation 20(4) the penalties are a financial penalty not exceeding £2,000 and the publication penalty.

The final question sought views on this breakdown.

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.

In total, 36 respondents made a commented on Question 5.

The use of fines as a penalty

Most of those who responded supported some form of penalty in the form of fines for non-compliance of the standard and to encourage compliance. Many of these considered there to be a need for higher fines to act as a true deterrent against non-compliance.

Of those responding in support of higher fines, a small number considered the need to reflect the cost of required upgrades, the additional costs incurred to the tenant as a result of non-compliance, the costs incurred by the enforcement authority to investigate, and the cost cap to secure an exemption. A small number noted the risk of escalating rents for tenants as landlords try to cover the cost of works or fines.

Of those responding in support of the current or lower levels, some commented that they should be fixed within the regulations rather than at the discretion of each local authority, with reasons in support of this including:

• ensuring consistency across Scotland, particularly noting that landlords may have properties in a number of local authority areas;
• reducing the risk of legal and other challenge;
• simplify understanding of how the fine has been calculated;
• enable the scale of penalties to more simply comply with the maximum fine per breach of £5000; and
• if not within the regulations, clear guidance should be provided on how to calculate the various fines based on the severity of the breach.

Of those who are opposed, completely or in part, to the use of fines as a penalty, a small number representing a range of respondent types, responded that the approach proposed will result in a reduction in PRS housing supply particularly in rural areas.

A small number of respondents commented on the way in which fines gathered by local authorities should be spent, suggesting it should be used to the benefit of fuel poverty and energy efficiency services within local authorities or though centralised advice services.

Enforcement

When responding to views on the use of penalties, particularly in reference to their ability to achieve success in delivering the objectives of the regulation, some from a broad range of respondent types expressed concern about the burden being placed on local authorities. These concerns included the following:

• the additional burden on limited resources;
• the option to consider a centralised approach;
• the need for additional resources to be committed to meet these new requirements;
• lack of resources will result in poor levels of compliance;
• enforcement will become reactive, risking that the worst properties slip through the net; and
• the need to consider pilots to gauge the burden and resources needed for a robust enforcement approach.

Some, across a broad range of respondent types, responded that the system should be based on support, incentives and flexibility to encourage improvements to properties.

Reasons in support of this this include:

• the need for flexibility regarding the timing of works particularly with reference to seasonality;
• the availability of contractors within the supply chain;
• the need to focus available funds on energy efficiency measures to the benefit of tenants;
• the risk of a reduction in overall supply of PRS housing, including long term voids which can incur higher council tax costs;
• the ability to take into account demonstrable investment programmes where, but not limited to, where a landlord holds a large portfolio;
• the option to build on pilot work already in operation in some parts of Scotland which supports landlords by providing information and one to one support on their responsibilities;
• encouraging landlords to go beyond the standard and make more intelligent investment decisions based on longer term programmes of repair, to the benefit of the tenant and to the long term benefit of the housing stock;
• funding should be made available for all landlords. Current options are too limiting in the criteria; and
• funding could be based on the approach for social landlords where the property provided is at an affordable rent.

Others responded that the approach to enforcement should be more closely linked to the process for landlord registration. This small number provided detailed comments on the practical application of the regulations as follows:

• any appeal process should be considered by the Housing and Property Chamber First Tier Tribunal;
• using this approach would give tenants a right of appeal and right to compensation;
• it provides a natural trigger point of engagement between the landlord and local authority (as opposed to a change of tenancy which local authorities are unaware of);
• the process for landlord registration and re-registration after 3 years is now operational. The proposed approach will be confusing for tenants, landlords and local authorities;
• local authorities are already gathering information using this system in a consistent manner, which would allow better picture building on the suitability of a landlord;
• there are issues regarding the EPC register and the data held there;
• the standards should form part of the repairing standard;
• EPC banding could easily be added to the landlord registration system; and
• the need for formal enforcement may prove limited if the local authority takes the view that the landlord is not a fit and proper person and so, revokes their registration as a landlord.

In terms of the practical roll out of the regulations a small number sought additional time. This would allow for the undertaking of appropriate works or to secure an exemption as expressed below:

'This may take a number of years given the availability of assessors and installers, the possible need for consents from other parties, and the lead in time for planning consents. The application of enforcement penalties should therefore be phased.'

Organisations – voluntary/charitable

Some specific comments have been made regarding the work required by the enforcement authority. These include the following:

• the perceived benefit of using a publication penalty which will have limited impact;
• the omission of Regulation 9 from the list at Regulation 16(5);
• the need for guidance on the duration of any exemption (guidance para 4.2.1);
• what happens in the event of penalty being applied but the property remains below the standard set;
• the need for a robust communications strategy to promote the standard including for tenants;
• the need for clarity on the primary legislation;
• the links to the repairing standard and clarity on who is the responsible authority for both;
• the order in which notices should be served to ensure landlords are sufficiently sighted on any breach in advance of the serving of any penalty notice;
• the method to pursue non-payment of fines; and
• the nature of the review process and appeal process.

Other issues raised

A number of other views were expressed, which, while not directly in answer to the question posed and only made by a small number of respondents, are important to capture and are as follows.

• concern regarding the use of EPC to measure for the standard, the quality of EPC assessors, and the quality of the methodology behind the EPC;
• a suggestion that the dates for roll out and enforcement be linked to the industry updates to SAP;
• concern regarding the level of fines which should be linked to rental income rather than being fixed;
• the option to consider the use of rent penalty notices;
• the option to make it illegal to market a property which is non-compliant;
• the option to link this to the letting agents code of practice;
• the option for an automated reminder service to help landlords manage exemptions;
• the option for Scottish Government to consider funding support for local authorities to implement these regulations, or use of a pilot in a small number of authorities; and
• the option to trigger the withdrawal of exemptions where technology has moved on and provides a solution for hard to treat properties.