By now, EPCs (Energy Performance Certificates) are a familiar part of the rental process. They were introduced by the Labour government as part of HIPs (Home Information Packs), which were criticised for introducing unnecessary bureaucracy to the property sector. Since EPCs came into force in 2008, we’ve become used to arranging energy performance assessments and adding them to the particulars of rental properties.
Just two weeks after being elected, the coalition government made good on its promise to scrap the hated HIPs in England and Wales. Many believed that this would also be the end of EPCs, but they were retained. The coalition agreement said:
While scrapping HIPs, we will retain and build on energy performance certificates to support our commitment to improve the energy efficiency of homes and businesses through our ‘Green Deal ’.
This commitment conflates two separate issues: the Green Deal and changes to the law on energy efficiency for buildings which could have implications for letting agents. Some of the regulatory changes are part of the Energy Bill currently making its way through Parliament (which includes the Green Deal), while others are changes to the EPB regulations – or, to give them their full title, the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007.
One of the proposed changes will mean commissioning EPCs more often. Currently, the EPC on a rental property remains valid for ten years, but a proposed amendment to the rules would reduce this period of validity to just one year.
This proposal has caused controversy, not least because of the odd way in which the government carried out a consultation on the issue. Estate Agent Today reports that a joint letter from the Department of Energy and Climate Change (DECC) and the Department for Communities and Local Government (CLG) went out on December 8th announcing a consultation on various aspects of the Energy Performance of Buildings framework. The consultation ended on December 21st, allowing just two weeks for organisations to canvass their members and respond. As a result, there were only around a hundred responses. The government’s own best-practice guidelines state that a consultation period should last for at least 12 weeks unless there is an overriding reason to do otherwise.
The Institute of Domestic Energy Assessors (IDEA) then decided to carry out its own survey and pass responses to the government, despite the fact that the official consultation period is now over. The survey, intended for professional energy assessors and conducted using a 7-page questionnaire, appears to still be in progress at the time of writing.
IDEA also created a petition in support of the proposals to reduce the validity period for EPCs to one year. This petition closed on April 4th. It is not clear why this industry body created a petition in order to agree with government proposals, and IDEA could not be reached for comment during the writing of this article. However, their reasons for wanting a reduced validity period were set out on their website:
The EPC software has been updated every year, since its inception, to make it more accurate... An EPC that is more than a year old will not provide accurate information.[A longer validity period] would also prevent any government harvesting accurate figures as to the UK’s housing energy efficiency, tackling fuel poverty or allowing such bodies, as the Energy Saving Trust to offer help/grants to those in fuel poverty or to our senior citizens.
Of course more frequent energy efficiency reports are good news for professional assessors, especially now that there are more accredited assessors than jobs to go round. But letting agents could be forgiven for thinking that a decreased validity period simply means more paperwork and extra costs.
We heard a different view from Nick Salmon FNAEA, founder of anti-HIP campaign group SPLINTA. He believes that the validity period is less important than other issues. “The implications as far as agencies are concerned are to do with cost and practicality. Whether it’s one year or ten years, it’s the customer who pays and it’s a cost that will ultimately be passed on.”
Mr Salmon is currently lobbying the government about how much energy performance data has to appear in the property particulars sent out by estate agents and letting agents. Although he is lobbying chiefly on behalf of estate agents, it’s an issue that concerns letting agents too: the definition of “written particulars” will be tightened up in July to ensure that it covers particulars produced for rented properties.
A typical EPC report is six or seven pages long. If included in full, this could double the size of each set of particulars, with obvious cost implications for agents. “If the government thinks people are going to read through all that when they’re looking at a property, they’re further in cloud-cuckoo land than I thought,” says Mr Salmon. “I can’t remember the last time someone asked for one. It’s been perhaps three or four times out of thousands and thousands.”
There is currently confusion over whether the new rules will require the full report, or whether an alternative proposal, to include an extract the length of two sides of A4, will be adopted. The rules are set to be implemented on July 1st but there has still been no official announcement about which option the government has chosen.
Mr Salmon told Agreement that the CLG has mentioned the two-page option in its discussions with him. This would be manageable, although Mr Salmon has suggested his preferred alternative: if the particulars contain the bare essentials of energy performance information, including the all-important summary graph and the list of recommended improvements, this will give potential buyers and tenants an at-a-glance idea of the property’s efficiency. This could be combined with a warning urging potential buyers (or, presumably, tenants) to request the full report before committing to a purchase.
Other proposals on EPCs are also worthy of attention, including a move towards increased transparency. Currently the energy performance data collected for EPCs may only be disclosed to certain authorised parties. The changes proposed would make energy performance data publicly available. This is intended to facilitate research and analysis as well as public awareness of the impact buildings have on CO2 emissions. However, the Department of Energy and Climate Change admits that these changes are also intended to benefit businesses who provide energy efficiency measures. Making this information public will make it much easier for such businesses to research and target potential markets. This means that these businesses will be able to directly target landlords whose properties are in need of improvement. Letting agents could be cut out of the process unless they are proactive in advising landlords on these issues.
The new rules would also make the letting agent, rather than the landlord, responsible for arranging the EPC if the agent is responsible for marketing the property. This goes alongside a proposal to shorten the period allowed to get the EPC ready. Under changes set to be implemented from July 1st, the EPC will have to be available within seven days of the property being put on the market. However, if “reasonable” efforts have been made to arrange the EPC, the agent will have another 21 days to make it available. In practice, this may not be very different from the current 28-day rule, with the difference that the agent is legally responsible for meeting the deadline. However, these changes are subject to regulations which have not yet gone before Parliament, so it is too early to treat the proposals as a fait accompli.
So would we be better off if EPCs hadn’t been introduced in the first place? For Nick Salmon, it’s a pointless discussion. “Neither SPLINTA nor I will get drawn into the argument about whether EPCs have any validity for the consumer. It’s a pointless argument because the issue is so far up the political agenda that practicalities for the industry come way down the list.”
The reality is that EPCs are here to stay because of binding European law. The European Directive on the Energy Performance of Buildings (EPBD) specifies that properties must have a certificate showing their energy rating, accompanied by recommendations on how to improve efficiency. In England and Wales, the directive was implemented into law by the EPB regulations currently being amended, while other countries chose their own ways of making the directive law. The governments of EU countries can choose how to implement it, but not whether or not to implement it at all.
Similarly, as letting agents we have a choice about how we deal with EPCs, but we can’t ignore them. But we can recognise the silver lining – when landlords are drowning in paperwork, they’re more likely to need professional help. Many landlords failed to comply with EPCs when they were first introduced, risking fines and legal action. Each non-compliant landlord represents an opportunity for us to raise awareness and make a case for using property professionals. Although we may not welcome increased regulation, we can use it to show how valuable our services are.
This article was first published in Agreement, the trade magazine for property letting professionals. The information in this article refers to England and Wales only. Letting agents in Scotland and Northern Ireland should consult their devolved administrations for more information about how EPCs are to be implemented in those countries.