Chapter 3: Exclusions and Exemptions

The following chapter sets out information on the general exclusions and exemptions from meeting the minimum standard which are permitted by the Regulations.  Other specific exceptions to the prohibition on letting sub-standard property, including where a recommended measure fails the seven year payback test, and the special provisions relating to wall insulation, have been covered in earlier chapters.

As discussed in chapter one, any exemptions from the prohibition on letting which are claimed by a landlord may not pass over to a new owner or landlord upon sale, or other transfer of the property. If a let property is sold or otherwise transferred with an exemption registered, the exemption will cease to be effective and the new owner will need to either improve the property to the minimum standard at that point, or register an exemption where one applies, if they intend to continue to let the property.

As noted in the introduction, any notice served by a landlord, a tenant, or a third party under the Regulations, including where the landlord is approaching a third party to obtain consent to make an improvement, must be made in writing and may be sent by post (e-mail and other electronic communication will also be acceptable).  Where the notice is sent to a body corporate, the Regulations state that it may be addressed to the secretary or clerk at that body corporate, although it would be best practice for the party in question to send any correspondence to the most relevant contact at the organisation, including any named individual with whom the landlord typically corresponds with, on issues such as the day to day contact relating to the lease.  Where a notice or other communication is sent to a partnership, the Regulations state that it may be addressed to any partner or a person who has control or management of the partnership business (Regulation 3).

3.1 Temporary Exemptions

3.1.1 Third Party Consent exemption (Regulation 31 and Regulation 36)

63. Depending on circumstances, certain energy efficiency improvements may legally require third party consent before they can be installed in a property.

Such improvements may include external wall insulation or solar panels which can require local authority planning consent in certain instances, consent from mortgage lenders, or other third parties. Landlord’s consent may be required where the landlord is himself or herself a tenant. Consent may also be required from the current tenant of the property or other tenants depending on the provisions of the lease or leases. Where third party consent is required for a particular measure the landlord must identify this requirement and make, and be able to demonstrate to enforcement authorities on request, ‘reasonable effort’ to seek consent.

65. It is not practical to provide an exhaustive list of all situations where third party consent will apply. Information on when and where consent is required will be contained within relevant documentation, for example in the landlord’s lease or mortgage conditions. If a landlord is in any doubt about whether consent is required for a measure they should seek appropriate advice. Landlords are also strongly advised to speak to their local authority planning department if they are in any doubt about whether planning consent is needed to implement a particular improvement, particularly where the building to be improved is listed or within a conservation area.
66. The landlord may let a sub-standard property where they can demonstrate that they have been unable to improve the energy efficiency rating of the property to at least the minimum level of energy efficiency (EPC rating E) because they could not obtain one or more necessary consents. If this applies and the landlord registers the exemption on the PRS Exemptions Register, the landlord will be exempt from the prohibition on letting sub-standard property for five years from the date the exemption is registered, or, where lack of tenant consent was the issue, until the current tenancy ends. This temporary exemption applies where the landlord:

• needed consent from another party, such as a superior landlord, a mortgagee, or planning or listed building consent, and despite their reasonable efforts they could not obtain that consent, or the consent was given subject to conditions they could not reasonably comply with; or
• could not carry out the proposed improvements without the consent of the tenant or tenants of the property, and one or more of the tenants refused to give consent.

67. Please note: where a particular improvement cannot be made due to consent considerations, but where there are other relevant improvements which can be made, and for which consent will not prove a barrier, the landlord will (subject to any of the other exemptions and exceptions) still be required to install these, and will not be able to rely on the consent exemption in relation to them.
68. Also note, where improvements cannot be made because consent could not be obtained from the current tenant of the property, the exemption will only remain valid for as long as that tenant remains the tenant.

Reasonable Efforts to Obtain Consents

The Regulations require the landlord to make ‘reasonable efforts’ to obtain third party consent. Reasonable efforts may include attempts on a number of separate occasions and using a number of different available means of communication to secure agreement from, for example, a tenant or superior landlord, with evidence to show this had been done (in the case of planning consent refusal, evidence of a single application and subsequent refusal is likely to be sufficient evidence).

Broadly speaking, it is thought that that it will not be reasonable for the landlord to comply with a condition which may reduce the landlord’s ability to let the property or if it involves unreasonable costs.   Where the landlord does not agree with an enforcement authority’s review of a penalty notice, he or she can appeal to the First Tier Tribunal.

68. The Regulations also allow for an exemption where a Landlord has proposed to fund the improvements through a Green Deal plan but the tenant has refused to give the consent required for the Green Deal plan^[1]. However, as Green Deal finance is not currently available for non-domestic properties, this is not relevant.

3.1.2 Property devaluation exemption (Regulation 32 and Regulation 36 (2))

 A temporary exemption of five years from meeting the minimum standard will apply where the landlord has obtained a report from an independent surveyor who is on the Royal Institution of Chartered Surveyors (RICS) register of valuers^[2] advising that the installation of specific energy efficiency measures would reduce the market value of the property, or the building it forms part of, by more than five per cent. The property valuation must not include the cost of the measures themselves or the cost of installation. This temporary exemption provides a safeguard for landlords in situations where energy efficiency measures might significantly impact upon the property’s commercial value, although the government expects this exemption will apply infrequently.

71. A surveyor’s report prepared to support this exemption must clearly state all the recommended relevant energy efficiency measures for the property that would lead to it being devalued. In such cases a landlord will still be required to install any improvements recommended for their property that are not covered by the surveyor’s report.
72. Where the property cannot be improved to an EPC rating of E because certain energy efficiency measures will devalue the property, and the landlord intends to rely on an exemption to comply with the Regulations, the landlord must register the exemption. Details on the registration of an exemption on the PRS Exemptions Register are provided in chapter four. After five years the exemption will expire and the landlord will again need to try to improve the property to meet the minimum standard, or register another valid exemption.

3.1.3 Exemption due to recently becoming a landlord (Regulation 33 &Regulation 36 (2))

 The Regulations acknowledge that there are some, limited circumstances where a person may have become a landlord suddenly and as such it would be inappropriate or unreasonable for them to be required to comply with the Regulations immediately. If a person becomes a landlord in any of these circumstances (set out below), a temporary exemption from the prohibition on letting a sub-standard property, or on continuing to let a sub-standard property, will last for six months after the date they become the landlord and will apply from that date.

73. The circumstances are:

• the grant of a lease due to a contractual obligation (this is intended to cover a situation where a contract was entered into on a contingent basis, regardless of whether it was entered into before or after the Regulations came into force);
• where the tenant becomes insolvent and the landlord has been the tenant’s guarantor (in this situation, the tenant’s guarantor becomes a landlord when taking over the lease);
• the landlord has been a guarantor, or a former tenant, who has exercised the right to obtain an overriding lease of a property under section 19 of the Landlord and Tenant (Covenants) Act 1995 (for the avoidance of doubt, a “guarantor” who exercises this right under the 1995 Act is the guarantor of a former tenant);
• a new lease has been deemed created by operation of law;
• a new lease has been granted under Part 2 of the Landlord and Tenant Act 1954;
• a new lease has been granted by a court order, other than under Landlord and Tenant Act 1954.

74. Additionally, from 1 April 2023, when the minimum standard applies to all privately rented non-domestic properties that are occupied by tenants, a temporary exemption of six months will apply from the date from which a person became a landlord in the following situation:

A person becomes the landlord on purchasing an interest in a property and, on the date of the purchase, it was let on an existing tenancy.

75. In all cases landlords are advised to obtain their own independent advice if they are unsure about whether any of these temporary exemptions apply in their case. Where a landlord does intend to rely on one of these exemptions, they must register the exemption on the PRS Exemptions Register (see table two in chapter four for more details) at their earliest opportunity. After six months the exemption will expire and the landlord must either have improved the energy efficiency of the property to at least an EPC rating of E, or have registered another valid exception or exemption, if they intend to continue letting.

The tenant consent requirements of a Green Deal plan are set out in Regulation 36 of the Green Deal Framework (Disclosure, Acknowledgement, Redress etc.) Regulations 2012.  Please note however that, at this time, Green Deal finance for a new Green Deal plan is not available.

The Royal Institution of Chartered Surveyors’ register of valuers may be accessed via their website: http://www.ricsfirms.com/ .  Please note that the RICS register contains the details of surveyors covering a range of disciplines, therefore landlords seeking a valuation report for the purposes of a property devaluation exemption are advised to check that any valuer they intend to instruct is competent to carry out a valuation of this nature.

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