Rural Law

The Scottish Government’s aims on minimum standards of energy efficiency in the private rented sector were originally consulted on in 2017. We already knew the headline minimum standards of EPC Band E then D – see the footnote on energy efficiency here.

In their Consultation on The Energy Efficiency (Private Rented Property) (Scotland) Regulations 2019, issued in June and open until September, we now finally have sight of draft regulations fleshing out the detail.

Properties affected

The Regulations will apply to tenancies to which the Repairing Standard applies.

The Repairing Standard does not – at present – apply to all properties within agricultural tenancies, but is being extended to do so from 2027 (see my previous blog). This means that the minimum energy efficiency standards won’t apply to those properties until that time.

Holiday lets are also excluded as the Repairing Standard does not apply to them.

 

Exceptions and Exemptions

 A landlord will be able to let their property notwithstanding that it does not meet the minimum level of energy efficiency if:

  • The landlord has made all relevant energy efficient improvements. Energy efficient improvements are listed in Schedule 1 to the Regulations and cover a wide range of measures. To be “relevant” the improvement must recommended in an EPC, surveyor’s report or green deal report; or
  • There are no relevant energy efficient improvements to be made. This requires a written opinion from an independent professional to state that the improvement is not appropriate for the property due to potential negative impact on the fabric or structure of the property or larger building; or
  • The landlord has been unable to make improvements due to lack of consent, either from the current tenant or a third party. Third party consent would include where planning permission or listed building consent is needed; or
  • The cost of making improvements would exceed the cost cap being £5,000 in respect of the period 1 April 2020 – 31 March 2022 (i.e. to try to reach Band E) and a further £5,000 after 31 March 2022 (to reach Band D). The draft guidance confirms that the £5,000 includes VAT, and also suggests that expenditure up to 6 months in advance of 1 April 2020 will be able to be taken into account.

There is also a proposed temporary exemption of 6 months for landlords who acquire a property subject to a sitting tenancy or due to creation of a lease through contractual obligation or operation of law.

To rely on any of the above, the landlord must register information in the relevant PRS Exemptions Register, a register to be created and maintained by each local authority.

Other than the cost cap, the exemptions effectively last a maximum of five years, following which the landlord has to reassess the position and register the exemption if it still applied.

Penalties

It will become an offence to let or continue to let a property which is “sub-standard” i.e. which does not meet the minimum EPC rating at the time, unless an exemption or exception applies.

Compliance is enforced by the local authority. They can issue a “compliance notice” seeking information to demonstrate compliance with the regulations, and can issue financial penalties for non-compliance. The maximum financial penalty is £5,000.

A financial penalty can be accompanied by a “publication penalty” – which publicises on the PRS Exemptions Register the breach of the regulations and the penalty imposed.

Conclusions

Space considerations here mean that further analysis will follow in future articles. Rural landlords are likely to face multiple barriers to meeting these standards – their housing stock is generally older and less efficient to begin with; they may struggle to find the contractors or tradespeople to physically undertake the works.

The Consultation seeks views on whether the regulations and guidance make landlord’s obligations sufficiently clear, as well as on the support available and the proposed 6 month lead in time for expenditure.

The Consultation closes on 13 September and we would encourage all interested parties to contribute their views.

Note: The draft Regulations in a number of respects do not reflect the stated intentions of the Guidance. We anticipate that these issues will be corrected ahead of being laid before Parliament and as such the above report does not highlight any such issues.

Fiona Scott

Senior Associate at Brodies LLP
Fiona is a Senior Associate in the Land and Rural Business team in Edinburgh. She acts in and provides advice on the full spectrum of rural property matters, principally from the perspective of large landowner clients. She has particular expertise in regulation of the private rented sector .
Fiona Scott