A number of new regulations have been put in place over recent years by the Scottish Government with the aim of improving the position of private residential tenants. As part of this overhaul of the sector, with the specific aims of improving housing standards and the environmental impact of poor housing stock, the Scottish Parliament has approved new regulations for the energy efficiency of all privately rented residential properties in Scotland.

These regulations were originally intended to be in force from 1 April 2020. Following delays in the Parliamentary process, the Scottish Government had recently confirmed that the new regulations would not actually be enforced until 1 October 2020. The current Coronavirus outbreak has however changed things once again. It was announced on 26th March 2020 that the regulations are currently indefinitely delayed, due to the movement restrictions presently in place which would prevent landlords carrying out any necessary works to their properties, as well as the additional burden placed on Local Authorities in monitoring compliance and enforcement. The regulations are still expected to be brought into force in due course, once the current crisis has passed. As a result, the dates noted in this article are correct at the time of writing but may be subject to change.

What is the EPC?

All properties on the Scottish rental market currently require a valid and up to date Energy Performance Certificate (“EPC”). The EPC defines a building’s energy efficiency and its environmental impact rating. These details help a tenant to understand how much their bills may cost, as well as the environmental effect of living in the property.

The EPC lasts for 10 years before requiring an update and provides its ratings on a scale, with A being the most energy efficient and G being the least. These ratings will become more important when the proposed minimum requirements are enforced later this year.

What are the new minimum requirements?

From 1 October 2020, any property let to new tenants will need to have a minimum EPC rating of E or above. By 31 March 2021, this minimum requirement will be extended to include all domestic rented properties, even where a tenant has been living in the property for several years and there is no change of tenancy.

From 1 April 2022, no new lettings will be permitted unless the property has a minimum EPC rating of D or above and this standard will also be extended to cover all properties (even where there is no new lease) from 31 March 2025.

What does this mean for Landlords?

Landlords are being encouraged to take action as soon as possible to carry out any works that will be needed to their properties to raise them to the required EPC standards. It is particularly important to remember, for example, that a minimum EPC rating of E will apply to all rented properties in two years’ time (by 31 March 2022) even where the property has been and remains occupied by an existing tenant.

What are the exemptions?

The current proposals offer several exemptions, including:

  • Where tenants refuse to allow the works
  • Where listed building or conservation area consent for the works cannot be obtained
  • Where the cost of the improvements for the period to 31 March 2022 is more than £5,000 and again where the costs after 31 March 2022 also exceed £5,000.

The precise nature of the exemptions will be confirmed when the regulations are actually brought into force.

Enforcement and Compliance

Local Authorities will have powers to serve Compliance Notices on landlords who are in breach of the regulations. Failure to comply may result in the issue of a financial penalty up to a maximum of £5,000 per property.

What about houses in agricultural tenancies?

At present, the main farmhouse let with an Agricultural Lease is exempt from these regulations, but they will apply from March 2027. All secondary residential properties under the tenancy (such as cottages occupied by employees or family members or let out to third parties) are caught by the new regulations.

Summary

It will be important for all prospective and existing landlords to bear in mind the costs which could be associated with upgrading their properties to meet the new EPC standards and the dates by which these standards will apply to their properties. It is recommended that preparations are made as soon as possible to identify any affected properties, the works that will be needed and the likely costs of compliance.

Get in Touch

For more information about the new regulations or residential tenancy agreements more generally, please get in touch with our team.