Domestic Landlord Guide – Chapter 2

The following chapter sets out information to help a landlord identify the improvements which they can make to an EPC F or G rated domestic property to allow it to meet the minimum standard, and examples of the funding options open to them, including information on the new capped landlord self-funding element. 

The chapter will first discuss the steps a landlord needs to take to identify “relevant” improvements they can make to their property. As you will see, in the first instance a landlord can identify potential improvements using the current EPC recommendations report for the property. There are also additional options available as set out below. This chapter will then discuss sources of funding to assist landlords in carrying out their chosen improvement measures. 

2.1 Relevant energy efficiency improvements

2.1.1 Relevant energy efficiency improvements and recommendations reports (regulation 24)

For the purposes of the Regulations, “relevant energy efficiency improvements” which a landlord may choose to install to enable a sub-standard property to reach EPC E (either a single measure, or a combination of measures as appropriate) are any energy efficiency improvements recommended for the property through any of the following:

• an energy efficiency recommendations report (including the recommendations report accompanying a valid EPC – see box six below)

³⁷, or

• a report prepared by a surveyor³⁸, or
• a Green Deal Advice Report (GDAR)
• “Recommendations report” has the meaning given in Part 1, section 4 (1) of The Energy Performance of Buildings (England and Wales) Regulations 2012: “recommendations made by an energy assessor for the cost-effective improvement of the energy performance of a building or building unit”.
• A qualified surveyor is one who is on the Royal Institution of Chartered Surveyors’ register of valuers. The register can be accessed via RICSs website at: www.ricsfirms.com.

A list of the energy efficiency measures which may be recommended for a property on an EPC or as part of a GDAR are set out at Appendix D.

A note on “relevant energy efficiency improvements”

While EPC reports and the other recommendations reports described above provide guidance on the types of measures which may be technically appropriate for a particular property, it is not the objective of the Regulations to require landlords to install particular energy efficiency technologies. The Regulations introduce the concept of “relevant energy efficiency improvements” (as defined above) as a guide. However, a landlord remains free to make any improvements they wish to their property to raise the

39 The cost information used for the EPC recommended measures is in the process of being updated. Until this happens, the indicative costs figures do not accurately reflect current solar PV. The cost of a 2.5kW PV system is on average £4,500, according to BEIS Solar PV Cost Data from May 2017.

property to the minimum standard of EPC E. Therefore, a landlord may install any measures they choose (even if not recommended for the property via an energy efficiency recommendations report), so long as they are confident that the measure(s) will improve their sub-standard property to a minimum of EPC E.

However, if a landlord chooses to make improvements which are not “relevant energy efficiency improvements”, and those improvements fail to raise the property to a minimum of EPC E, the landlord will not then be able to let the property, or to register an exemption on the basis that they have made improvements to the property but it remains below E. In this instance the landlord will need to make further improvements to the property to try and improve the EPC rating to a minimum of E if they wish to let it.

Any landlord who has made improvements to a property, but not enough to raise that property to EPC E, will only be able to register a regulation 25(1)(a) exception (the exception available when all “relevant improvements” have been made and the property remains below an E) if they have first installed all “relevant energy efficiency improvements”. See section 4.1.1 in chapter four for more information on regulation 25(1)(a) exceptions.

2.1.2 “Relevant energy efficiency improvements” and funding

(regulation 24)

While the recommendations reports described above at 2.1.1 will list one or more measures which will be technically suitable for a property, a recommended energy efficiency measure will only be a “relevant energy efficiency improvement” for the purposes of the Regulations if:

• third-party funding is available to cover the full cost of purchasing and installing the improvement(s); or
• where third-party funding is unavailable, the improvement(s) can be purchased and installed for £3,500 or less (inclusive of VAT) using the landlord’s own funding; or
• the improvement(s) can be installed through a combination of landlord self-funding and third-party funding with a total cost of £3,500 or less (inclusive of VAT).

Third-party funding options

Third-party funding may be available from one or several sources, including but not limited to:

• Energy Company Obligation or similar scheme designed according to section 33B or 33BD of the Gas Act 1986 or section 41A or 41B of the Electricity Act 1989 (see below);
• A Green Deal Finance Plan (see below);
• Local Authority Grant Funding.

Information on the Energy Company Obligation (ECO) 3 Scheme

ECO is a requirement that the Government places on energy suppliers to reduce the UK’s energy consumption and support those living in fuel poverty. It does this by requiring energy suppliers to provide households (including households in rented accommodation) with energy efficiency and heating improvements. Obligated energy suppliers have bill savings targets which they are legally required to meet. The current obligation runs until March 2022. Government consulted on the details of the 2018 – 2022 scheme in Spring 2018; the response to consultation can be viewed here⁴⁰.

Certain properties in the domestic PRS will continue to be eligible for energy efficiency measures under the ECO3 scheme. Properties in the domestic PRS that are already at EPC Band E or above can benefit from any ECO measure, including First Time Central Heating. For domestic PRS properties at EPC Band F and G, the ECO scheme allows solid wall insulation and renewable heating measures to be delivered to these properties. Other measures are not permitted for F and G properties as the Government expects that landlords should provide working heating systems to their tenants alongside other basic energy efficiency features.

Landlords can find out more about ECO here⁴¹ and here⁴². They can also find out whether a property they let may be able to benefit from ECO funding by visiting the government endorsed Simple Energy Advice service here⁴³.

•  gov.uk/government/consultations/energy-company-obligation-eco3-2018-to-2022
• gov.uk/energy-company-obligation
• ofgem.gov.uk/environmental-programmes/eco/support-improving-your-home/faqs-domestic-consumers-andlandlords
• https://www.simpleenergyadvice.org.uk/pages/energy-company-obligation

ECO Flexible Eligibility

Under the “flexible eligibility” element of ECO, energy suppliers are able to deliver up to 25% of their Affordable Warmth obligation in properties identified by local authorities as fuel poor or low income and vulnerable to the effects of a cold home.

As part of their enforcement duties under the minimum standard Regulations, therefore, local authorities (LAs) may have an opportunity to identify eligible E, F and G rated domestic private rented properties, and refer them onto energy companies as eligible under ECO: Help to Heat. This may allow landlords of sub-standard properties to access supplier obligation support to meet their required obligations under the Regulations. It is important to note however that a referral by the LA will not guarantee that a measure will be installed, as this will be ultimately the decision of an energy supplier, or their intermediary.

 Information on the Green Deal

The Green Deal is a finance mechanism which enables homeowners and households to take out loans to pay for energy efficiency improvements, with repayments made through the energy bill. A list of the energy efficiency measures for which Green Deal finance may be available is set out at Appendix D of this guidance.

Repayments for a Green Deal loan are made on a “Pay As You Save” (PAYS) basis: after the improvement has been made, the household begins to save energy, ensuring their energy bills are less than they would have been without the improvement, and these savings are used to repay the loan.

The Green Deal includes a principle called the “Golden Rule”, under which the first year’s repayments must not exceed the estimated first year saving, and the overall repayment period must not exceed the lifetime of the measures installed.  This aims to help ensure that, overall, savings are greater than payments.

A Green Deal Finance Plan can provide funding, or part funding, for energy efficiency improvements to help a rental property meet the minimum standard.  The Green Deal charge is attached to the electricity meter at the rental property.  It is paid off over time by the bill payer – so in most cases the tenant rather than the landlord. A tenant in turn, while paying the Green Deal charge for as long as they pay the electricity bill at the property, should be able to enjoy energy bill savings equal to or greater than the charge.

Landlords can apply for a Green Deal loan by contacting a Green Deal Provider, details of which can be found on the Green Deal Oversight and Registration Body’s website (http://gdorb.decc.gov.uk/green-deal-participant-register).

 Additional third-party funding options

Alongside Green Deal funding and the Energy Company Obligation, funding may be periodically available from central or local government. Funding of this nature is likely to be less predictable, and more localised than Green Deal or ECO funding. Many local authorities will run energy efficiency grant schemes from time to time with varying qualifying conditions, and funding available in one area may not be available in another area, or at the same level.

Due to the varied nature and availability of local funding opportunities, landlords will need to investigate the availability of funding for the area where their property or properties are located by speaking with the relevant local authority. Advice on the availability of funding for making energy efficiency improvements is also available on the grants database on the government endorsed Simple Energy Advice service here⁴⁴.   Do note that this grant has expired, the link is archived and no longer active.

Landlord self-funding and the cost cap

If a landlord of an EPC F or G rated property is unable to secure third-party funding, they will need to use their own funds to cover the costs of improving their property to EPC E (or as close as possible). This requirement is subject to a spending cap of £3,500 (inclusive of VAT). This cap applies to the overall cost of improving the property, not to the cost of individual measures. Therefore, a landlord of an EPC F or G property need only invest a total sum of money up to the level of the cap in improving their property, and need not invest in multiple measures which, individually, cost £3,500 (or less).

Moreover, the cap is an upper ceiling – it is not a target or a spend requirement.

If a landlord can improve their EPC F or G property to E (or higher) for less than £3,500 then they will have met their obligation and need take no further action. (Analysis suggests that the average cost of improving an EPC F or G rated property to band E is £1,200.)

In cases where a landlord is unable to improve their property to E within the

£3,500 cap, then they should install all measures which can be installed up to the £3,500 cap, and then register an exemption on the basis that “all relevant improvements have been installed and the property remains below E” (see chapters four and five for exemption advice). Analysis suggests that, for F and G

44 https://www.simpleenergyadvice.org.uk/grants

rated properties which cannot be improved to band E within the £3,500 cap, the combined average cost of the improvement, or improvements, which can be made is £2,000.

See the worked funding examples on the subsequent pages for more information.

Relevant energy efficiency improvements

As noted at section 2.1.2 above “relevant energy efficiency improvements” are those improvements which can be funded via either:

• third-party funding (Green Deal finance, ECO, funding provided by central government, a local authority or a third-party); or
• landlord self-funding; or
• a combination of landlord self-funding and third-party funding.

If third-party funding is not available at a sufficient level to fully cover the cost of a recommended improvement, or improvements (for instance because the costs exceed what can be borrowed within the Green Deal golden rule), the landlord must turn to alternative means of funding, including self-funding, provided the combined costs of purchasing and installing the measure(s) do not exceed the £3,500 cap (inc. VAT).

Example three: 

The following recommendations have been made for property C:

Self-funding:

Based on the above recommendations, the landlord of property C could choose either to install floor insulation, at a cost of £1,200, or to install flat roof insulation, at a cost of £1,500. Individually, either would improve the property to EPC band E and no further improvements would be required, although they could also choose to install low energy lighting and/or heating controls if they wished, while still keeping their spend within the cap.

Third-party funding:

Alternatively, the landlord may be able to obtain ECO funding to cover the costs of solar panels. If funding is available they should install this measure; this will improve the property above EPC E and no further action would be required.

Combined third-party funding and self-funding

In some instances, a landlord may be able to secure some third-party funding, but less than £3,500, and not enough to improve the property to EPC E. In such cases, the Regulations require the landlord to top up this third-party funding with their own funding, provided the combined value of the funding (third-party and self-funding) does not exceed the £3,500 cap (inclusive of VAT).

If this combined funding is sufficient to improve the property to EPC E then the landlord will need to take no further action. If the combined funding is insufficient to improve the property to E then the landlord should install all

The £3,500 cost cap – spending on energy efficiency improvements incurred on or after 1 October 2017

When calculating their spend within the cost cap, landlords may take account of any energy efficiency improvement costs incurred since 1 October 2017, including where funding was obtained through a third-party. Therefore, where energy efficiency improvements have been made to an EPC F or G rated property since 1 October 2017, the landlord may subtract the cost of these previous energy efficiency improvements from the £3,500 limit (inclusive of VAT) to determine the value of the remaining energy efficiency improvements must make.

Please note: the cost of any energy efficiency improvements incurred before 1 October 2017 may not be included in the cost cap.

Worked Examples: Cost of energy efficiency improvements incurred pre 1 October 2017

Worked Examples: Cost of energy efficiency improvements incurred pre and post 1 October 2017

Guidance for landlords and Local Authorities on the minimum level of energy efficiency required to let domestic property under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, as amended.

This section is a distillation of the published Government regulations and was correct at the time of incorporating within the GO LOCAL EPC site. For a copy of the full original document please select this link THE DOMESTIC PRIVATE RENTED PROPERTY MINIMUM STANDARD.  This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated.