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Don’t let this first step become tied up in red tape

Back in 2011 the Government introduced legislation that Ministers promised would outlaw the letting of any F- or G-rated buildings from 2018. This month marks the conclusion of the
Government’s formal consultation detailing precisely how this potentially market-revolutionising policy will be delivered in practice.

The private rented sector is of growing importance in the residential sector. In the last 15 years the number of people renting from private landlords has increased from 10 to 18 per cent of all households.

That is a sizeable percentage. But nothing like as large as the proportion of the buildings in the non-residential sector that are rented out.

Precise figures are surprisingly difficult to establish. But most property professionals reckon that the shorter-term (under 99 year) leasehold sector covers between 60 and 66 per cent of all such buildings.

Based on the record of Energy Performance Certificates (EPCs) lodged to date, approaching 1 in 5 of the certificates registered for non-residential buildings are currently at F or G. But as the Chartered Institution of Building Service Engineers has repeatedly pointed out, there are a vast number of eligible buildings where the leaseholder has altered – but no EPC has been issued, meaning the law has been breached. And nobody official has moved a finger.

Underlying presumption
By definition, it can’t be proved, but the underlying presumption must be that, within this illegal sub-strata, are likely to be found an even greater proportion of the least energy efficient commercial buildings.

Perversely, these are precisely the buildings that are to be completely excluded from the new minimum energy performance standards regulations. The ban on letting out an F or G-rated building only applies to buildings for which an energy certificate has been issued.

So, if the building doesn’t have any EPC, nobody officially knows whether it is highly energy efficient or among the worst gas-guzzlers. Whichever, its details don’t appear on any official register. And so nobody will ever formally be charged with chasing up whether such leases will, or won’t, be illegal after April 2018, when these regulations officially start.

But I am not convinced that there is a will to ensure all those with an overt F or G-rating will be required to upgrade. Throughout the consultation document, there is an underlying commitment that “landlords would only be required to make those improvements which could be made at no net or upfront cost”. This is not a phrase that is to be found in the 2011 Act. Introducing this restriction at this stage is unnecessary gold-plating of the legislation, and is really not in accord with the legal text.

Similarly it seems that if anybody raises the slightest objection to any improvements being made – whether a cowed tenant like a pub landlord of a large brewery, a head lessee based overseas, or even a Council planning officer – then this will be deemed to be sufficient reason not to proceed.

At the very least, we need to create a central record of properties where such overt wriggling against the regulations has taken place.

Critically, who will police compliance? As ever, it falls upon the local authority’s Trading Standards
Department. I have never come across such a Department that was not already heavily over-stretched (hence perhaps the absence of chasing up of unissued EPCs)?

While government may theoretically have to compensate local authorities for such extra burdens, any sums involved seem inevitably to be lost within overall grants settlements, and seldom apportioned by local treasurers to the relevant department. Precisely as happened to the Home Energy Conservation Act’s “extra” resources.

The answer is to create a new direct revenue stream to motivate full-hearted participation. Just as parking enforcement became far more diligent when councils got to keep some of the money collected, so it would be logical for trading standards to retain the revenue from successful prosecutions for non-compliance with EPCs and minimum energy ratings. Ensuring that the results of all prosecutions, both successful and failed, are placed on an open public register should avoid the worst abuses.

Avoid upgrading buildings
The consultation document set out fifteen questions, many of which seem to be concerned how landlords can successfully avoid upgrading their building. There really is a nit-picking and negative approach underlying too many of these questions. When Parliament passed the relevant Act in 2011, it did so in the clear understanding that from 2018, there would effectively be no non-residential buildings available for rental which remained F or G-rated.

Were the government to adopt even a portion of the exemptions mooted in the consultation, it is likely that the will of Parliament will have been deliberately frustrated by unnecessary bureaucratic devices.

Frankly, 99.9 per cent of non-residential buildings can perfectly cost-effectively be moved up to the (very modest) E-rating. In fact, recent research for the Government’s own Green Construction Board confirms that improving buildings to a D-rating makes a lot more financial sense.

This would be sad. Because this new initiative does have the potential to eliminate some of the least energy efficient buildings, both residential and non-residential. The Coalition government deserves great credit for arranging for it to be introduced – albeit not until three years after the General Election.

By next May the final regulations will need to be agreed, with the presumption that “outlawing’ every F- and G-rated building is mandated. This would be just the first step towards upgrading the building stock we shall be occupying in 2050.

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