A British Property Federation guide to
A
B
C
D
E
F
G
Energy Efficiency
and the Private
Rented Sector
Local authority action
Local authorities have powers under the Housing
Act 2004 to inspect properties using the Housing,
Health and Safety Rating System (HHSRS) and
require improvements to properties where there are
unacceptable risks to the health and safety of the
occupants. One such risk assessed under HHSRS is
excess cold. Excess cold can be caused by severe
deficiencies in the thermal performance of a building.
A Standard Assessment Procedure (SAP) assessment
may provide additional supporting evidence for the
HHSRS assessment when formal enforcement action is
subject to challenge and may help identify appropriate
remedial measures .
Not only must local authorities tackle the worst
performing properties, but they must also plan for
how performance of the whole of the housing stock
in their area could be improved. New guidance was
published by DECC in July 2012 which set out how
local authorities should prepare reports on the energy
conservation measures that they consider practicable,
cost-effective and likely to result in significant
improvement in the energy efficiency of the housing
stock within their boundaries. Local authorities are
required to issues their reports by 31st March 2013.
2.4.
Availability and display of Energy Performance Certificates (EPCs)
The government has tightened the requirements over
when EPCs must be commissioned and provided to
potential tenants or buyers of domestic property (for
the exact rules, please see Annex A). The changes
are intended to ensure that EPCs are made more
prominent and are made available in promptly to allow
for their use in tenant and buyer decision making.
These changes are supported with greater use of
the online EPC Register which hosts copies of lodged
EPCs. The register is now open free of charge to
the public, allowing anyone to download a copy of a
property’s EPC, either by entering an address or an
EPC 24-digit Report Reference Number.
2.5.
Smart meter roll-out
The Energy Act 2008 requires energy companies
to roll out smart meters to all domestic properties
between 2014 and 2019. Smart meters are the next
generation of gas and electricity meters and offer
a range of functions such as a real time display of
energy consumption and remote meter reading. Smart
meters are intended to raise the profile of energy
use for occupiers so they know exactly what they
are using and how much it is costing them. Increasing
tenant awareness of energy use and cost through
smart meters could in turn increase interest in the
energy performance of the building that they are
living in or are considering renting.
2.6.
Rising energy bills
The average dual-fuel energy bill for a typical
household increased (in nominal terms) from around
£605 in 2004 to £1,060 in 2010 (75%), and it is
projected that this could increase (in real terms) to
£1,250 in 2020 (18%), assuming that there is only
limited success in implementing energy efficiency
measures 5 . Whilst energy is only one component
of overall accommodation costs for tenants, the
trajectory for energy bills will mean that this
component will continue to increase. High energy
costs mean less money is available to tenants for rent
payments, which may particularly affect households
on a low income. It may also make tenants more likely
to factor a property’s energy bill costs into the total
cost of occupying a property.
2.7.
An emerging business case?
It is possible that given the introduction of smart
meters and thus greater awareness of energy use
and spend, further increase in energy prices and the
improved profile of EPCs, tenants and property buyers
will have an increased awareness of the importance of
energy efficiency. In addition to these market drivers,
as set out above, central and local government will
require significant carbon savings to be made from
the built environment, with considerable attention
already being paid to the PRS as a sector requiring
improvements.
Whilst currently there is no clear evidence that
vacancy rates, rental or capital values will improve
from investment in energy efficiency improvements,
given the aforementioned factors, it is probable
that this will change in the future. Some studies
are already showing a potential link emerging. The
Energy Saving Trust in its report, Trigger Points: A
Convenient Truth found that double glazed windows
were believed by landlords to attract a better-quality
tenant and a longer lease. Some of our residential
landlord member organisations have also begun to
report increased tenant interest in particularly visible
forms of property component, such as boilers and
windows.
Given the expectation that energy efficiency could
increasingly be an important factor for landlords,
due to market demand, government regulation or a
mixture of the two, it is important that landlords are
able to understand how and when properties can be
improved, and what options there are for funding
improvements. This publication aims to provide this
guidance.
© British Property Federation 2013
5 http://downloads.theccc.org.uk.s3.amazonaws.com/Household%20Energy%20Bills/CCC_Energy%20Note%20Bill_bookmarked_1.pdf
Foreword by Rt Hon Greg Barker MP, Minister of State, DECC
3
Foreword by Liz Peace, Chief Executive, British Property Federation
4
Executive summary
5
About the British Property Federation
5
Contact
5
Contributors and sponsors
6
1.0
Why energy efficiency is important
7
2.0
Energy efficiency and the private rented sector
9
3.0
The role of Energy Performance Certificates
11
4.0
Improving Energy Performance Certificate ratings
13
5.0
Funding energy efficiency improvements
23
Introduction
23
The Green Deal
23
The Green Deal Cashback scheme
25
The Energy Company Obligation
26
The Landlord Energy Savings Allowance
27
Reduced VAT for energy efficiency improvements
27
The Feed-in Tariff Scheme
28
The Renewable Heat Premium Payment and Renewable Heat Incentive
29
Developing a suitable strategy
32
6.0
Annex A – When Energy Performance Certificates are required
33
Annex B – Old and new Energy Performance Certificate front page comparison
35
Content
2.3.
Liz Peace
Minister of State, Department of Energy and
Climate Change (DECC)
Chief Executive,
British Property Federation
The Coalition Government is determined to make the UK become a
leader in energy efficiency. We have set out our ambitious agenda in
a new and comprehensive national strategy which details our policy
direction for the coming years, highlights the barriers we face and
outlines additional steps we are now taking to stimulate the energy
efficiency market.
We’re pushing hard to tackle the major energy and carbon challenges
we face. To take just one example, the new Energy Efficiency
Strategy, launched recently in November, will change the way
power is used in important sectors such as housing, and also across
transport and manufacturing.
There’s no doubt that using energy more wisely is absolutely vital in
a world of increased pressure on resources and rising prices. Not only
can energy efficiency help save money on bills and cut emissions, it
can support green jobs, innovation and enterprise. For example, the
energy efficiency sector in the UK already accounts for around 136,000 jobs, and had sales of
£17.6 billion in 2010/11. Sales in this sector have grown by over 4% per year in the UK since
2007/08, and are projected to grow by around 5% per year between 2010/11 and 2014/15.
The Green Deal will play a major role in delivering our agenda. It is a radical new programme
aimed at connecting consumers with finance, allowing energy efficiency home improvements
to be paid for through savings in energy bills. We want to empower consumers to make
improvements to 14 million homes, which could save 17TWh of energy by 2020, with
improvements to an additional 12 million by 2030.
These are ambitious targets and to meet them we need the private rental sector to play its full
role. The Green Deal overcomes the ‘split incentive’ barrier in rented property by putting the
onus of paying for energy efficiency improvements on the bill payer. Owners benefit long term
from home improvements and tenants enjoy a more energy efficient home which is paid for
through the savings in their energy bills.
From 2016 we will also be bringing in new measures to ensure private rental homes are
improved but with incentives for early uptake, like the Cashback Scheme to coincide with the
launch of the Green Deal, so as to ensure private rentals are making energy efficiency savings
well in advance of this.
The Green Deal provides a fantastic opportunity to transform the quality and comfort of millions
of homes across the UK and we hope you will join us and realise these benefits for yourself and
your properties.
Improving the energy efficiency of the UK’s housing stock is a key
part of the government’s plans for tackling a number of significant
policy challenges – reducing emissions, tackling fuel poverty,
delivering energy security and promoting economic growth. Despite
improvements in the energy performance of the existing housing stock
over the last few years, if the government is to meet its objectives, it is
clear that the rates of improvement must be radically stepped up.
Consequently, a number of policies are being introduced to encourage
further improvements in the energy performance of the UK’s housing
stock. The government’s Green Deal scheme is intended to incentivise
the take up of energy efficiency improvements by allowing the cost
to be paid for over time via a charge on a property’s electricity bill.
In rented property, tenants will make the repayments through their
electricity bill whilst they are in situ and enjoying the benefits of the
improvements.
Forewor
Rt Hon Greg Barker
The Green Deal is expected to be supplemented with new regulations designed to ensure,
one way or another, that the private rented sector delivers its share of energy efficiency
improvements. These regulations are expected to mean that, from April 2016, tenants will have
a right to request certain energy efficiency improvements that a landlord may not unreasonably
refuse, and from April 2018, the lowest Energy Performance Certificate-rated properties
will be unlettable until they are improved. These provisions are subject to consultation and are
likely to involve limitations, but provide a strong signal of intent that the government is seeking
significant energy efficiency improvements.
Historically, a key challenge to encouraging the take up of energy efficiency improvements in
the private rented sector has been the lack of a return on investment – a landlord invests in
the improvements, but it is the tenant that benefits from reduced energy bills. Whilst currently
there may be little evidence of a link between energy efficiency and property rental or capital
values, it is possible that this may change in the coming years as energy bills rise, information
on property energy efficiency is made more prominent, local authorities take action and the
government introduces further regulation.
Energy efficiency can be a subject fraught with complexity and all too often government energy
efficiency policy is misunderstood. This guide, developed with input from government and
industry experts, seeks to provide much needed clarity on energy efficiency for private rented
sector investors. I recommend it as a good first step in considering the issue, and the challenges
and opportunities it poses.
I welcome the work the BPF has done with the Government on energy efficiency, and commend
this guide as an excellent tool to help landlords take action to improve the energy efficiency of
their properties.
4
Contributors & sponsors
Executive summary
This guide seeks to provide a starting point for
landlords when developing energy efficiency
improvement plans for their properties. It does
this by explaining the direction of policy on energy
efficiency standards in the private rented sector, how
energy efficiency is calculated through the Energy
Performance Certificate (EPC) methodology, and
how landlords can plan and fund improvements that
increase EPC ratings.
In chapter one, we set out the key drivers causing the
government to seek energy efficiency improvements
from the housing stock. This provides context on
why the government is developing and implementing
policies designed to improve energy efficiency in the
private rented sector, and the wider housing stock.
In chapter two, we set out the government’s energy
efficiency policies relevant to the private rented
sector. Some of these policies are in place now and
some are due in the future. Each is designed to either
incentivise or force private landlords to improve the
energy efficiency of their properties. These changes
are likely to increase the importance of a property’s
EPC rating.
And finally in chapter six, we set out how landlords
may like to devise a strategy for improving the energy
efficiency of their properties. This is intended to
provide landlords with a starting point when assessing
their properties, indicating the considerations that
ought to be included when devising a forward plan
for improvements.
About the British Property Federation
The British Property Federation is the voice of real
estate in the UK, representing companies, owning,
managing and investing in real estate. This includes a
broad range of commercial and residential property
companies, institutional investors, fund managers,
corporate landlords, housing associations, as well as a
number of regional landlord associations. A list of our
largest members can be found at http://www.bpf.org.
uk/en/members/our_members.php.
Contact
For further information relating to this guide, please
contact Tom Younespour, Senior Policy Officer, at
tyounespour@bpf.org.uk or 0207 802 0126.
Thanks to contributors and sponsors
In chapter three, we explain the purpose of the EPC
and how it calculates its ratings. This section explains
the various roles that the EPC now plays, growing
from its original purpose as a tool for gathering
and displaying energy efficiency information. The
increasing number of functions played by the EPC
is likely to increase its value and the importance of
ensuring accurate ratings.
In chapter four, we explain how EPC ratings can
be improved, with the use of theoretical case
studies produced by the Energy Saving Trust. The
case studies seek to provide an understanding of
the types of works that are likely to be required to
progress up through the EPC ratings. Each package
of improvements is recommended on the basis of
the most cost effective option from the landlord’s
perspective, and each package of measures is
calculated from a starting point of an F EPC rating.
In chapter five, we set out the funding options
for energy efficiency and micro-generation
improvements that are currently available. The
government has set out a range of funding and
incentive schemes to support the take up of
improvement measures. The benefits of each vary
and some may be more attractive and viable than
others, depending on a landlord’s circumstances,
type of property, kinds of tenant in situ, and the
improvements being sought.
We would like to extend our thanks to the following
who have kindly contributed to the content of this
guide: Beth Hill (Allsop), Paul Winstanley (Allsop),
David Weatherall (Energy Saving Trust and the
Intelligent Energy Europe REQUEST project), Sue
Highmore (Practical Law Company), Chris Paul
(Trowers & Hamlins) and Rhianna Wilsher (Trowers
& Hamlins).
We would also like to thank the following sponsors
of the guide whose kind assistance has made its
publication possible: Allsop, Annington, Grainger,
Evenbrook, Genesis, Residential Land and the
Residential Landlords Association.
This guide is correct as of January 2013 and is based on our best understanding of existing and future known legislation. Whilst
every effort has been made to ensure the accuracy of the information provided in this guide, it is not intended, nor should it be
construed as being, a substitute for professional advice. The British Property Federation and the guide’s contributors and sponsors
cannot accept liability for any losses, damages, costs and expenses suffered by any person or organisation as a result of any
reliance on the material in this publication.
© British Property Federation 2013
6
1.0
Why energy efficiency is important
1.1Introduction
1.3 There are three key drivers towards energy efficiency
in the UK’s built environment: reducing greenhouse
gas emissions, ensuring security and reliability of
energy supply, and ensuring the affordability of
energy bills, particularly for those at risk of fuel
poverty. Energy efficiency also holds wider benefits
to the economy in that it reduces costs to businesses
and households, freeing up money to be spent and
invested in other areas, and creates jobs in upgrading
properties. This chapter explains each of these drivers
in more detail.
The UK government and devolved administrations
have targets to ensure that, as far as reasonably
practicable, no household should be in fuel poverty
by 2016 (2018 for Wales). The current definition
of fuel poverty is when a household needs to spend
more than 10% of its income on fuel to maintain a
satisfactory heating regime of 21°C for the main
living area and 18°C for other occupied rooms during
daytime hours2. Improving the energy efficiency of
properties occupied by households in or at risk of fuel
poverty is a key objective for the government, as
energy efficiency reduces the cost of energy bills and
improves occupant health.
1.2
Emissions reduction
Affordability and fuel poverty
A key driver for government action to reduce the UK’s
greenhouse gas emissions is the Climate Change Act
2008, which legally binds the UK to reduce the UK’s
annual greenhouse gas emissions by 80% by 2050
and 34% by 2020, against a 1990 baseline. The Act
also created a carbon budgeting system that caps
emissions over five year periods, with three budgets
set for 2008-12, 2013-17 and 2018-22.
The government sees improvements to the existing
property stock as a key opportunity area to make
progress against its emissions saving targets.
The government’s December 2011 Carbon Plan1
highlighted that 25% of the UK’s emissions come from
domestic property and that reducing demand for
energy is the cheapest way of cutting emissions. The
Carbon Plan included the following building related
improvement targets:
• reducing emissions by 29% by 2017, 35% by
2022, and 50% by 2027 – for buildings this means
a reduction between 24% and 39% lower than
2009 levels by 2027
• insulating all cavities and lofts, where practical, by
2020
• achieving between 1 million and 3.7 million
additional solid wall insulations and between 1.9
million and 7.2million other energy efficiency
installations by 2030
• achieving between 1.6 million and 8.6 million
1.4 Over the next decade, the UK will need to invest
in new generation capacity to replace the coal and
nuclear power stations that are set to close by the
early 2020s, to maintain the UK’s energy security.
By reducing demand for energy through enhanced
building energy efficiency, the government will,
to a certain extent, be able to mitigate the need
for additional capacity and so will be better able to
ensure the UK continues to have access to reliable
and affordable sources of energy. Furthermore, by
helping to deliver security and reliability of energy
supply, the UK will be less dependent on imported
energy, which is susceptible to geopolitical instability.
1.5
“The Government believes
that climate change is one of
the gravest threats we face,
and that urgent action at
home and abroad is required.
We need to use a wide
range of levers to cut carbon
emissions, decarbonise the
economy and support the
creation of new green jobs
and technologies. We will
implement a full programme
of measures to fulfil our joint
ambitions for a low carbon
and eco-friendly economy.”
Security and reliability of supply
The UK economy
Energy efficiency reduces the proportion of business
and household income spent on energy, freeing up
resources for investment in other areas. Additionally,
the project to retrofit the UK property stock
holds potential for the creation of new jobs. The
government expects that the Green Deal scheme,
which offers a new financing option for energy
efficiency improvements, will support around
65,000 jobs by 20153.
The Coalition Agreement, 2010
building level low carbon heat installations, such as
heat pumps (government modelling suggests that
21 – 45% of heat supplies to buildings will need to
be low carbon), by 2030
• ensuring emissions from UK buildings are “close to
zero” by 2050.
1 http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/carbon-plan/3702-the-carbon-plan-delivering-our-low-carbon-future.pdf
2 This definition in England may be amended from early 2013 following the government’s review of fuel poverty to better assess the extent and depth of fuel poverty
3 http://www.decc.gov.uk/en/content/cms/news/bpfspeech/bpfspeech.aspx
8
4
2.0
Energy efficiency and the
private rented sector
2.1Introduction
• some types of property will be exempt, and this is
Given the government’s objectives to achieve energy
efficiency savings, policies are being put in place
to ensure that, over the coming years, significant
improvements are made to the UK’s existing property
stock. This chapter sets out the key policies being
pursued to achieve the government’s objectives on
energy efficiency that are relevant to the private
rented sector.
However as the regulations have not yet been laid,
it is not possible to advise upon the exact form
these provisions will take. We are working with
the government and industry to consider how the
regulations could be devised to drive the right market
responses and avoid causing damage to the private
rented sector.
2.2
2.3 Private rented sector regulation
According to government statistics, whilst the energy
efficiency of properties in the private rented sector
has improved over the last few years, the sector
still has the largest proportion of properties with
the worst energy performance ratings; 13.5% of
private rented sector properties are rated F or G on
their EPC4. The government expects that the Green
Deal and Energy Company Obligation (ECO) will
provide a stimulus for investment in energy efficiency
improvements, but considers that the incentive
offered may not be sufficient to drive improvements
on the scale necessary. It has therefore taken powers
in the Energy Act 2011 to allow for the creation
of new energy efficiency regulations specifically
for the private rented sector. The Act requires the
government to:
• introduce a right for tenants to request energy
efficiency improvements that a landlord will be
unable to unreasonably refuse; this must be in place
by 1 April 2016
• make it illegal to let property that falls below a
specified minimum EPC rating – this provision
must be in place by 1 April 2018, and will also
encompass commercial property; the Act does not
state what EPC rating the property must reach, but
the government has indicated that it is likely to be
an E rating.
Secondary legislation will set out the detail for these
provisions and the government has indicated that
there will be a number of caveats to the requirements.
These include that:
• the improvements required must not entail upfront
costs to the landlord, which is expected to mean
that only improvements that could be funded
through the Green Deal and any available ECO
funding, would be required
• if consents and permissions for improvements are
withheld by third parties a landlord would not be
forced to override them
4
5
6
7
8
likely to include listed property.
Local authority action
Local authorities have powers under the Housing
Act 2004 to inspect properties using the Housing,
Health and Safety Rating System (HHSRS) and
require improvements to properties where there
are unacceptable risks to the health and safety
of the occupants. One such risk assessed under
HHSRS is excess cold. Excess cold can be caused by
severe deficiencies in the thermal performance of
a building. A Standard Assessment Procedure (SAP)
assessment (which is used for EPC assessments)
may provide additional supporting evidence for an
HHSRS assessment when formal enforcement action is
subject to challenge and may help identify appropriate
remedial measures5.
In addition to tackling the worst performing stock,
local authorities must also set out plans for delivering
improvements to the energy efficiency performance of
the whole of the housing stock in their area. Guidance
was published by the Department of Energy and
Climate Change (DECC) in July 2012, which set out
how local authorities should prepare reports on the
energy conservation measures that they consider
practicable, cost effective and likely to result in
significant improvement in the energy efficiency of the
housing stock within their boundaries6. Local authorities
are required to issue their reports by 31 March 2013.
2.4 Availability and display of EPCs
The government has tightened the requirements
concerning when EPCs must be commissioned and
provided to potential tenants or buyers of residential
property (for the exact rules, please see Annex A).
The rules are intended to ensure EPCs are made
available promptly to facilitate their use in tenant and
buyer decision making. These changes are supported
with greater use of the online EPC Register7, which
hosts copies of lodged EPCs. The register is now
open free of charge to the public, allowing anyone
to download a copy of a property’s EPC, either
by entering an address or an EPC 24 digit Report
Reference Number8.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/6748/2173483.pdf
http://www.cieh.org/assets/0/72/1126/1212/1216/1218/9531976b-6749-4823-918f-e823b735bc10.pdf
http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/saving-energy-co2/5992-guidance-to-english-energy-conservation-authoritie.pdf
https://www.epcregister.com/
Property owners can request that their property’s EPC is not retrievable from the online EPC Register
2.5
Smart meter roll out
The Energy Act 2008 requires energy companies
to roll out smart meters to all domestic properties
between 2014 and 2019. Smart meters are the next
generation of gas and electricity meters, which offer
a range of functions such as a real time display of
energy consumption and remote meter reading. Smart
meters are intended to raise the profile of energy
use for occupiers, so they know exactly what they
are using and how much it is costing them. Increasing
tenant awareness of energy use and cost through
smart meters could in turn increase interest in the
energy performance of the building that they are
living in, or are considering renting.
2.6
Rising energy bills
The average dual fuel energy bill for a typical
household increased in nominal terms from around
£605 in 2004 to £1,060 in 2010 (a 75% increase).
It is projected that this will increase in real terms to
£1,250 in 2020 (18%), however such projections
assume some success in delivering improvements
in energy efficiency9. If such improvements are
not delivered, energy bills will rise at an even
faster rate. Whilst energy is only one component
of overall accommodation costs for tenants, the
upward trajectory for energy bills will mean that
this component of a tenant’s expenditure is likely
to continue to increase. High energy costs means
less money available to tenants for rent payments,
which may particularly affect households on a low
income. It may also make tenants more likely to factor
a property’s energy bill costs into the total cost of
occupying a property.
2.7.
Whilst currently there is no clear evidence that
investment in energy efficiency improvements will
result in improvements to vacancy rates, rental or
capital values, given the aforementioned anticipated
changes, it is possible that this will change in the
future. Indeed some BPF residential landlord members
have begun to report increased tenant interest
in visible property components, such as boilers
and windows.
Given the expectation that energy efficiency will
increasingly be an important factor for landlords,
due to market demand, government regulation or
a mixture of the two, it is important that landlords
understand how and when properties can be
improved, and what options there are for funding
improvements. This publication aims to provide
this guidance.
An emerging business case?
It is possible that enhanced knowledge of energy
use and spend amongst property occupiers, which
is expected to occur through the roll out of smart
meters, combined with an improved profile for EPCs
and the likelihood of further increases in energy
prices, will result in an increasing awareness amongst
tenants and property buyers of the importance of
energy efficiency. In addition, as set out above,
central and local government will need to take action
to deliver significant carbon and energy savings from
the existing property stock, whether or not market
demand for energy efficient properties materialises,
with attention already being paid to the private rented
sector as a sector requiring particular improvement.
9 http://downloads.theccc.org.uk.s3.amazonaws.com/Household%20Energy%20Bills/CCC_Energy%20Note%20Bill_bookmarked_1.pdf
10
3.0
The role of Energy
Performance Certificates
3.1Introduction
The EPC is the government’s main tool for measuring
property energy efficiency standards. This chapter
explains how EPCs work and their role as a tool
for communication, and increasingly as a tool for
wider policy and regulation. There are a number of
requirements placed on landlords regarding when
and how EPCs must be commissioned and issued, and
these are set out in Annex A. The rules on EPCs that
are explained in this guide apply only to properties in
England and Wales10 .
3.2
The purpose of EPCs
An EPC gives information about a property’s energy
use, typical energy costs and energy efficiency
improvement options. EPCs were introduced to
help both property owners make energy efficiency
improvements to their property, and to allow
prospective tenants or property buyers to assess
energy efficiency performance when choosing a
property to rent or buy. The standard format and
appearance of the EPC is set by the Department for
Communities and Local Government and was revised
in April 2012 to make it easier to understand and to
signpost the Green Deal. Annex B shows a comparison
of the first page of a residential EPC in the old and
new formats.
calculates the property’s energy demand assuming
a standard household and standard behaviour. EPCs
display a number of outputs from the assessment:
• a SAP rating based on how much the home will cost
to heat and light, from 1 (least energy efficient)
to 120 (most efficient); the EPC headline graph
shows the rating banded on a scale from A (the
most energy efficient) to G (least energy efficient)
– see Figure 1 on page 13 for the rating boundaries
• assumed total primary energy demand – how much
energy the home uses in total across the different
fuels used to heat and power the home
• assumed CO2 emissions for the home – based on the
total energy demand and the different fuels used
• standard recommendations for energy and carbon
saving improvements – these recommended
measures are identified on the EPC either as cost
effective measures that can be funded under the
Green Deal, or as appropriate measures that will
save energy but will not pay back their installation
cost in their lifetime.
EPC assessments are theoretical and so they will not
reflect the way in which the current occupier uses
the building (for example, whether they open the
windows when the heating is on). So the actual energy
efficiency use by the current or prospective occupier
may be very different from the assigned rating.
A full SAP assessment can only easily be carried out
on a new home where full details of construction
techniques and materials are known. For existing
homes, the Reduced Data SAP (rdSAP) methodology
is used, which makes a series of assumptions about
physical characteristics of the home to generate a
SAP rating. The underlying methodology is regularly
updated to take into account changes to available
improvement measures and the evidence base on the
in-use performance of energy efficiency measures.
This means that the outcome of an EPC assessment
on a property may differ depending on when it is
undertaken.
In order to provide an accurate EPC for an existing
property, the assessor will need to know:
• when the property was built (searches or deeds
may provide evidence)
• whether or not the property has been extended
and when
Whilst an EPC’s principal purpose is to increase
awareness and understanding of building energy
efficiency, the UK government has also begun to
utilise EPCs as a tool in support of other policies and
regulations, for example:
• if the property has been double glazed, and if so,
• a property must reach an EPC rating of a D or
• when boilers and hot water cylinders were installed
above to obtain the full solar PV Feed-in Tariff rate
applicable to the system size
• EPCs will indicate the existence of any Green Deal plan
relating to a property and will be the main conduit for
providing key information about such a plan
• it is expected that from April 2018 the
government will make it illegal to privately let a
property that is F or G EPC rated (subject to a
number of criteria explained in chapter two).
3.3
whether there are any certificates
• whether the walls have had cavity, internal or
external insulation
and whether there are any manuals
• the location of room thermostats and heating
timers
• the location of gas and electricity meters
• the type of heating fuel used.11
What EPCs measure
EPC assessments use the Standard Assessment
Procedure (SAP) that was developed by the Building
Research Establishment. SAP assesses the physical
conditions of the property – its walls, roof, floor,
windows, heating systems and lighting – and then
10 Information on Scottish and Northern Irish rules are available on the following web pages - http://www.scotland.gov.uk/Topics/Built-Environment/Building/
Building-standards/publications/pubepc and http://www.dfpni.gov.uk/energy-performance-of-buildings
11 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/15415/Energy_Performance_Certificates_-_Landlord_Guide.pdf
12
4.0
Improving Energy Performance
Certificate ratings
4.1Introduction
• Helping tenants change their behaviour to save
energy. Explaining how heating controls work
when tenants move in, and leaving instructions for
them to refer to, is important to help them get the
best from an energy efficient home. The Energy
Saving Trust website12 also contains energy
savings tips and advice, which could be flagged up
to tenants.
By making energy efficiency improvements to a
building, for example replacing an old boiler or
installing loft insulation, the building’s SAP score
will increase. The total SAP score is used in the
property’s final EPC rating (see Figure 1 for the rating boundaries).
An EPC assessment provides a list of suggested
improvement measures specific to the property and
outlines the associated improvement in SAP score
and EPC rating
Very efficient - lower running costs
that these would
(92 plus) A
make. If a Green
Deal Assessment
(81-91)
B
is made, a more
(69-80)
C
detailed report will
(55-68)
D
be provided.
(39-54)
(21-38)
E
F
(1-20)
G
Not energy efficient - higher running costs
Figure 1: SAP points and their corresponding
EPC rating boundaries
4.2
Factors to consider when making improvements
It is important to note that, whilst the installation
of measures is key to improving a property’s energy
efficiency and its EPC ratings, there are additional
factors that require attention to ensure that a
property performs to the standards expected. Here
are some examples.
• Maintaining the property in good repair. It is
essential that damp and damaged building elements
are tackled before or alongside energy efficiency
improvements. A damp wall will transmit heat out
of the building more readily than a dry wall, and
could cause structural problems and health issues
for tenants. Damaged windows are also a major
cause of heat loss
• Dealing with draughts and ventilation. Using
draught proofing around windows and doors
will help to ensure the property is as airtight
as possible. Ventilation should be delivered in
rooms that need it through fans or other planned
ventilation systems, rather than unplanned
draughts or open windows. Heavy curtains can
help reduce draughts from windows
12 http://www.energysavingtrust.org.uk/
13 http://www.climatechangeandyourhome.org.uk
4.3
Theoretical EPC improvement case studies
To give landlords an idea of the kinds of works
required to improve properties’ EPC ratings, we
have set out below four theoretical case studies
showing the packages of improvements required
to increase a property’s EPC rating. Each of the
four theoretical case studies has its own unique
characteristics, such as size and building type, but
all start with an F EPC rating.
Each property was subjected to a SAP 2009
assessment, as would be the case in real life, and
improvement packages were chosen on the basis of
the cheapest combinations of improvements (in terms
of parts and labour) to progress up the EPC ratings.
However it is important to note that:
• costs have been determined using the Energy
Saving Trust’s SAP calculation tool and are
indicative only
• tax reliefs or incentive schemes have not been
applied in the modelling
4.4
Disruption factors
Landlords will not only need to consider the
cost of improvement measures when choosing
improvement packages, but also when it would
be most appropriate to implement them. To
reduce disruption to tenants and to minimise the
time required to keep a property empty, it may
be sensible to implement improvements when
carrying out other non-energy efficiency related
works. For example, it may be appropriate to
internally insulate solid walls and insulate floors
at the same time as refurbishing a bathroom or
kitchen, or install solar panels and double glazing
when scaffolding is erected for other household
improvements.
As part of its European Union funded REQUEST
project14, the Energy Saving Trust has produced
guidance on ways to install energy saving
measures on a room by room basis, alongside
kitchen, bathroom or living room refits. These
guides are available on the Energy Saving Trust
website15 and can be easily found by searching
for ’kitchen‘, ’bathroom‘ or ’living space‘.
Following the four case studies, Table 1
explains the level of disruption likely to
be endured for key energy efficiency
improvement measures. The table is intended
to give landlords an idea of when measures
would be best undertaken to minimise
disruption and void periods.
• higher improvement costs may be preferred if the
measures can be installed more quickly, or with
tenants in situ; such factors have not been included
in the modelling
• the examples provided are intended for illustrative
purposes only; a specific building level inspection
by a qualified professional such as a building
surveyor, an EPC assessor or Green Deal assessor
should be undertaken before undertaking energy
efficiency improvement works; a property’s EPC
or Green Deal Assessment report will highlight
recommended measures appropriate for the
property, and the impact such improvements will
have on the EPC rating
• for older properties, specialist advice may be
required; the English Heritage Climate Change Your
Home website13 contains information on upgrading
traditional buildings.
14 http://www.building-request.eu/
15 http://www.energysavingtrust.org.uk/
14
Secondary glazing:
£659
Double glazing:
£1,960
Double glazing:
£1,960
-
Internal wall
insulation:
£3,286
Internal wall
insulation:
£3,286
-
-
-
-
Flooring /
roofing
Gas combicondensing boiler,
radiators and
controls: £5,901
Cylinder
thermostat:
£70
Modern slimline
storage heaters,
automatic controls:
£1,000
Cylinder
thermostat:
£70
Modern slimline
storage heaters,
automatic controls:
£1,000
-
Heating
Low energy
lighting:
£35
Low energy
lighting:
£35
Low energy
lighting:
£35
-
Lighting
-
-
-
-
-
Double glazing:
£2,940
-
Internal wall
insulation:
£5,356
Internal wall
insulation:
£5,356
-
Flooring /
roofing
-
Windows / external
doors
-
WWalls
New gas combicondensing boiler,
controls and radiators:
£6,591
New gas combicondensing boiler,
controls and radiators:
£6,591
Cylinder
thermostat:£70
Insulated hot water
tank: £30
Modern slimline storage
heaters and automatic
controls: £1,500
Cylinder thermostat:
£70
Insulated hot water
tank: £30
Improved controls:
£50
Heating
Improvements
EPC rating: F (36)
Annual fuel bills: £1,626
Property size: 75m2 Annual CO2 emissions: 7.3 tonnes
-
-
Low energy lighting:
£40
-
-
£14,927
£11,987
£1,640
£150
Total cost
£11,182
£6,351
£1,764
£659
Total cost
Renewable
energy
generation
Low energy lighting:
£40
Low energy lighting:
£40
-
Lighting
-
-
-
-
Renewable
energy
generation
4.6 Example B: 2 bedroom flat within a 1970s purpose
built block (leasehold)
Secondary glazing:
£659
-
Windows / external
doors
Improvements
EPC rating: F (35)
Annual fuel bills: £1,226
Property size: 52m2 Annual CO2 emissions: 4.4 tonnes
4.5 Example A: 1 bedroom Victorian mid-terrace
converted flat (leasehold)
WWalls
16
C
(77)
C
(69)
D
(58)
E
(41)
EPC
C
(74)
C
(71)
D
(55)
£503
£585
£1,168
£1,298
Annual
fuel bill
2.1
tonnes
2.5
tonnes
5.6
tonnes
6.3
tonnes
Annual
CO2
Improvement impact
E (51)
EPC
1.4
tonne
2.7
tonnes
4.16
tonnes
4 tonnes
Annual
CO2
This property cannot reach a B standard through works inside the property alone.
However, a combination of solid wall insulation and a new heating system gives a high
C rating. To reach a B the owner of the flat could work with the freeholder and other
flat owners to mount a solar energy system on the roof of the property. Alternatively,
they could adopt a combined heating system for multiple properties in the building,
using renewable energy (biomass or a ground source heat pump).
With all other parts of the property being made more energy efficient, the use of
secondary rather than double glazing would make a fairly marginal difference to the
SAP rating.
It is important that the boiler is sized correctly taking account of the reduced heat
demand from the more insulated property. In an off-gas situation an efficient oil
condensing boiler could be used. This is an effective choice, though it may cost more
to run and install than a gas boiler.
The property can be brought into the top of the C band through installing a highly
efficient new gas heating system along with window, wall insulation and lighting
improvements.
Insulating walls and windows is required to bring this property into the C band, if
storage heaters are to be used. Internal wall insulation can be fitted on a room by
room or whole property basis. If double glazing is not an option, replacement of the
heating system with a gas system is likely to be required to hit the C band.
By moving from direct acting electric heating to a storage system the amount of
electricity used goes up due to reduced responsiveness and control. However, the
overall cost of heating falls due to the lower electricity night rate tariff used with
storage heating. SAP is primarily a measure of heating cost and therefore the measure
actually improves the SAP score, while the CO2 emissions (which are calculated on
the total amount of electricity used) rise.
Secondary glazing, which fits inside the existing window reveal, would take this
property to an E rating and would not require freeholder consent.
Comments
To reach a B, the owner of the flat could work with the freeholder and other
flat owners to mount a solar energy system on the roof of the building.
Alternatively, they could adopt a combined heating system for multiple
properties in the building, using renewable energy (biomass or a ground source
heat pump).
This property cannot reach a B standard through works inside the property
alone. However, a combination of energy efficiency improvements and a new
heating system gives a medium C rating. If double glazing is not possible,
secondary glazing would cost between £500 and £1,000 and would only
reduce slightly the achieved energy rating.
Switching to a gas condensing boiler along with internal wall insulation brings
the property to a C standard. Normally it makes sense to fit secondary
or double glazing at the same time as the wall insulation, but glazing
improvements are not required to hit the C standard.
Fitting low energy light bulbs throughout the home makes a small but
significant improvement to SAP ratings.
Changing to the latest modern automatic storage heaters and heating controls
brings this home to a D standard.
Ensuring that a hot water tank is properly insulated is one of the most
important and basic energy saving improvements.
Improved heating controls can improve the efficiency of an old storage heater
based system.
Comments
A ground floor 1970s flat within a low rise system built block. The property
has metal single glazed windows and storage heating. As it does not have cavity
walls and has electric heating, the measures required to get it to higher bands
can be expensive, but the savings achievable are considerable.
£332
£602
£871
£1,106
Annual fuel
bill
Improvement impact
A small converted one bedroom flat situated mid-floor within a Victorian solid walled
property. It has single glazed windows and electric panel heaters. As this property is
within an old building and has electric heating, it is more expensive than most typical
properties to improve.
18
-
-
-
Double glazing:
£2,940
-
-
Internal wall
insulation:
£5,356
Internal wall
insulation:
£5,356
Floor
insulation:
£606
Loft
insulation
to 270mm:
£155
Loft insulation
to 270mm:
£155
Loft insulation
to 270mm:
£155
Loft insulation
to 270mm:
£155
Flooring /
roofing
Gas combicondensing
boiler and
new heating
controls:
£2,341
Gas combicondensing
boiler and
new heating
controls:
£2,341
Gas combicondensing
boiler and
new heating
controls:
£2,341
Thermostatic
controls: £50
Heating
Low
energy
lighting:
£40
Low energy
lighting:
£40
Low energy
lighting:
£40
Low energy
lighting:
£40
Lighting
Draught proofing for
doors: £22
Draught proofing
for doors: £22
Secondary glazing:
£1,647
Solid floor
insulation:
£1,279
Secondary glazing:
£1,647
Cavity wall
insulation:
£460
Cavity wall
insulation:
£460
Loft top-up
insulation: £155
Draught proofing for
doors: £22
Cavity wall
insulation:
£460
Solid floor
insulation:
£1,279
Loft top-up
insulation:
£155
Loft top-up
insulation: £155
-
-
-
Flooring /
roofing
Windows /
external doors
Walls
Gas combicondensing
boiler and
new heating
controls:
£2,341
Gas combicondensing
boiler and
new heating
controls:
£2,341
Thermostatic
radiator
valves/
additional
heating
controls: £50
Thermostatic
radiator
valves/
additional
heating
controls: £50
Heating
Improvements
Low
energy
lighting:
£50
Low energy
lighting:
£50
Low energy
lighting:
£50
Low energy
lighting:
£50
Lighting
EPC rating: F (37)
Annual fuel bills: £2,200
Property size: 130m2 Annual CO2 emissions: 8.6 tonnes
4.8 Example D: 3 bedroom mid-century
semi-detached house (freehold)
2 x insulated doors:
£948
Windows /
external doors
Walls
Improvements
EPC rating: F (34)
Annual fuel bills: £1,777
Property size: 85m2 Annual CO2 emissions: 6.6 tonnes
4.7 Example C: 2 bedroom end-terrace Victorian
house (freehold)
£7,200
2KW
solar
photo- voltaic
system
-
-
-
Renewable
energy
generation
2KW electric
PV system:
£7,200
-
-
-
Renewable
energy
generation
(excluding
earnings
from Feed in
Tariff)
£13,154
£5,954
£737
£100
Total cost
(excluding
earnings
from Feed in
Tariff)
£19,586
£7,892
£2,536
£245
Total cost
£380
£685
£926
£1,214
Annual fuel bill
2.1 tonnes
2.7 tonnes
3.7 tonnes
4.7 tonnes
Annual
CO2
To achieve a full low carbon refurbishment
of this property, installing solar PV
(electricity generating) technology would
need to be considered. This property is
suitable as it has a broadly south facing
roof. Additional insulation measures are
also required alongside the solar PV to
achieve the B rating.
Internal solid wall insulation is costed here,
as on a single property basis it is usually
cheaper than external wall insulation, but
this would be an alternative option.
As a central heating system is already
present in the property, fitting a new
boiler need not be a major inconvenience
to tenants. New heating controls are
required to be fitted alongside a new boiler
by building regulations, and will deliver
additional control and energy savings for
tenants.
As well as improving the EPC rating, the
addition of extra loft insulation (and
proper draught proofing) would help make
the property feel warmer and could help
reduce internal problems associated with
damp.
Comments
B
(83)
C
(76)
D
(61)
E
(54)
£318
£662
£1,354
£1,920
Annual fuel
bill
2.2 tonnes
3.0 tonnes
5.1 tonnes
7.8 tonnes
Annual
CO2
Improvement impact
With a south facing roof, this property is able to
benefit from electricity generating solar PV panels.
Renewable energy systems should only be installed
on well insulated properties.
Adding floor insulation to a solid concrete floor
is likely to cause significant disruption as it will
mean shifting objects from the floor and possibly
adjusting skirting boards and kitchen fittings.
This should preferably be done during vacant
possession. It could also be done on a room by
room basis.
Cavity wall insulation is one of the cheapest, least
disruptive and most cost effective energy saving
measures. Many homes have been fitted with
low levels of loft insulation in the past and would
benefit from insulation top-ups.
Fitting thermostatic radiator valves and low energy
lighting can be done easily on a DIY basis or by a
non-specialist installer.
Comments
A mid-century semi-detached gas heated three bedroom home with
un-insulated cavity walls, and a very low level of loft insulation, wood single
glazing and an old gas boiler. The property has a garden at the front and rear of
the property. Despite large fuel bills and poor energy performance, there are a
number of very simple and affordable measures that can be installed to radically
improve this property.
EPC
B
(80)
C
(71)
D
(62)
E
(50)
EPC
Improvement impact
A solid walled Victorian end-terrace property with an old gas central heating
system, few heating controls, and no loft insulation. The property has single
glazed windows and external doors, with a suspended timber floor. The
property has a roof that is broadly south facing
20
Can be installed
room-by-room
No
No
Yes
Yes
Level of
disruption to
tenants
Low
Medium
High
High
Cavity wall
insulation
External solid wall
insulation
Internal solid wall
insulation
Floor insulation
No
Yes
Yes
Medium
Low
Low
Loft insulation
Draught proofing
Hot water system
insulation
Measure
Yes
No
No
No
Low
High
Medium
Low
Efficient lighting
Heating system
replacement
Boiler replacement
Heating controls
Heating and hot water
No
Yes
Medium
High
Micro combined heat and
power (CHP)
Under floor heating
Lighting
Yes
Medium
Secondary, double and
triple glazing
Window glazing
Yes
Insulated external doors
Insulation
Low
Measure
Measure category
Can be installed
room-by-room
Underfloor heating can be very disruptive to install as existing floor coverings must be removed to allow the heating system to
be installed.
Micro-CHP generates heat and electricity simultaneously from the same energy source in individual homes or buildings. The main
output of a micro-CHP system is heat, with some electricity generation, at a typical ratio of about 6:1 for domestic appliances.
Micro-CHP units are generally most suitable for larger homes with a high heat demand. Micro-CHP systems are similar in size
and shape to ordinary, domestic boilers and, like them, can be wall hung or floor standing – with a similar level of disruption
associated with their installation. The only difference to a standard boiler is that they are able to generate electricity while they
are heating water.
You can reduce the costs of running gas central heating systems by fitting a room thermostat, timer and thermostatic radiator
valves. This gives tenants better control of when and where in the home heating is required. They can be installed without much
inconvenience for tenants.
It is important that boilers are sized correctly, taking account of the reduced heat demand from a more insulated property. The
most space efficient solution is a combi-condensing boiler. Heating controls are required to be fitted alongside a new boiler by
building regulations, and will deliver additional control and energy savings for tenants. Boiler replacement will usually take a day,
but can take more time if work is also required on the wider heating system, such as pipes and radiators. Installing a condensing
boiler for the first time will also involve work to the outside of the property to fit the condensate drain. An annual gas safety
certificate will have to be provided following installation of a gas boiler.
Installing the heating system can be a disruptive process and would require work in nearly every room of the property to fit pipes
and radiators. This would likely require the property to be empty in order to undertake.
Changing all light bulbs to energy efficient lighting plays a small but still important part in improving a property’s overall energy
efficiency: each low energy lightbulb saves around £3 a year in a typical household. LED lighting is more expensive than standard
energy efficient lighting but would save around £4 a year over a traditional bulb. Installation of lightbulbs requires very minor
inconvenience to tenants.
Whilst double or triple glazing help improve a property’s energy efficiency and can be attractive to tenants, installation will
require consent of any freeholder. Although not as effective, secondary glazing does not require freeholder consent as it fits
inside the existing window reveal, and it is cheaper to install. Low emissivity glass will improve the performance of secondary
glazing.
Building regulations in England state that installing a new door requires approval from the relevant buildings control body, and
new external doors now generally contain integrated insulation to reduce heat loss and comply with the regulations. A properly
fitted new external door should include an effective draught proofing system. Existing doors can be improved by simply fitting
draught proofing strips around the seals and the letterbox. Fitting draught proofing to the doors and windows will save the
typical household around £30 a year.
Comments
Insulating the hot water cylinder is one of the easiest ways to save energy. If the tank already has a jacket fitted, it should be at least 75mm thick. If it
is not, fitting a British Standard jacket around the cylinder will cut heat loss by over 75%. Insulation for hot water pipes will cost around £15 but will
save tenants that much in just a year. Fitting insulation to pipes is easy if the pipes are accessible; if pipes are hard to reach, professional help may be
needed.
Draughts occur in any gap that leads outside a property, such as windows, doors (including keyholes and letterboxes), loft hatches, electrical fittings
on walls and ceilings, suspended floorboards, pipework leading outside and ceiling-to-wall joints. It is advisable to block most of these, but care must
be taken in areas that need good ventilation, such as rooms with open fires or flues, and those where a lot of moisture is produced, such as kitchens,
bathrooms and utility rooms.
Many homes have been fitted with low levels of loft insulation in the past and would benefit from insulation top-ups. This is particularly important
where the level of mineral wool insulation is under 270mm. Mineral wool is the most common type of loft insulation – other types require different
depths. So long as the property’s loft is already clear, loft insulation can be installed within a short period of time with little disruption to tenants.
Insulating between the joists of the loft will keep the property warmer but make the roof space above colder. Pipes and water tanks will be more likely
to freeze so they may need insulating. If water tanks are far from the loft hatch, a walking passage may be needed for safe access. The cooler air in
an insulated loft could create cold draughts through the loft hatch. To prevent this, an insulated loft hatch could be installed with strips of draught
excluding material around the edges of the frame.
Floor insulation to a solid concrete floor is likely to cause significant disruption as it will mean shifting objects from the floor and possibly adjusting
skirting boards and kitchen fittings. This should preferably be done at times when tenants are away from the property. It could also be done on a room
by room basis as improvements are made to the property. For older properties with suspended timber floors, floor insulation can be fitted between the
joists below the floorboards. This involves raising the floorboards, but should lead to less overall disruption.
Internal solid wall insulation can be used where the property has no cavity walls or hard to treat cavity walls (meaning that they cannot be filled). Any
damp problems in the walls need to be tackled before SWI is fitted, either internally or externally. Internal SWI can be fitted on a room by room basis
and so can align with other refurbishment projects. Internal SWI is also usually cheaper than external SWI on a single property basis. However the
Energy Saving Trust estimates that internal SWI is marginally less effective than external SWI. Internal SWI can also involve extensive disruption, so is
best undertaken when the tenants are away or the property is empty.
External solid wall insulation is a form of solid wall insulation (SWI) and is used where the property has no cavity walls or has hard to tread cavity walls
(meaning that they cannot be filled). Any damp problems in the walls need to be tackled before SWI is fitted, either internally or externally. External
SWI would require the agreement of any freeholder and co-ordination with any other owners/tenants of other flats in the building. External SWI
may work best on terraced properties where the entire row is insulated at the same time (on aesthetic and cost grounds). For properties where the
appearance of the exterior needs to be preserved, external SWI could be put on the back or less visible walls and internal insulation on the front of the
property. External SWI could be undertaken with tenants in situ.
Cavity wall insulation (CWI) is installed externally by blowing insulation into the external walls’ cavities through holes made between the brickwork.
The work takes a matter of hours and need not disturb tenants except for noise during installation. Some types of cavity walls are not easily filled,
for example where the property is multi-storey the cavity is narrower than usual, or where it has been filled with rubble (this is typical of some early
twentieth century cavity walled homes). In these cases, specialist solutions may be required and this should be discussed with an insulation contractor.
Comments
Level of
disruption to
tenants
Table 1:Measure disruption factors
Insulation
Measure
category
Table 1:Measure disruption factors
22
Renewable electricity
Renewable heating
Measure category
Yes, for individual
No
No
Medium / high
Low
Low
Biomass boiler
Solar photo-voltaics
(PV)
Wind turbine
room stoves
No
No
Medium / high
Ground source heat
pump
Medium
No
Medium
Solar heating
Air source heat pump
Can be installed
room-by-room
Level of disruption to
tenants
Measure
Table 1. Measure disruption factors
Wind turbines harness the power of the wind and use it to generate electricity. Suitability for wind turbines depends on the available
wind speed and space to mount the turbine – they are usually best suited for rural areas. Building mounted wind turbines are
available, but are lower capacity and often less effective than pole mounted options. Installing a pole mounted system is unlikely to
be disruptive to tenants as it does not impact the inside of the property.
Solar PV requires a roughly south facing roof space on the property. It can be installed with minimal internal disruption and usually
does not require planning permission. However considerations such as the structural conditions of the roof, access for maintenance
and implications on insurance and mortgage conditions should be considered.
Biomass boiler systems burn biofuels such as wood pellets, chips or logs. There are three main options available: boilers that provide
heating and hot water for the whole house; stand alone stoves that provide heating to individual rooms, often as a secondary heating
system; and stoves with back boilers that heat the room directly but also provide hot water, and may run radiators in the rest of the
house. Choosing a system will depend on a range of factors and a competent professional installer should assess the property before a
purchasing decision is taken. The level of disruption involved in installing a system will vary between system types, and installation could
involve integration with existing heating systems, providing a suitable flue to disperse the combustion gases, and installing a permanent
vent to provide sufficient air for the appliance. Older houses with existing chimneys may be suitable but the chimney may need to be
lined.
Air source heat pumps (ASHPs) draw ambient warmth out of the outside air to heat the home and work best in well insulated
properties. Installing an ASHP would involve some disruption to the outside of the property, as it involves an externally mounted
unit.
Ground source heat pumps (GSHPs) draw warmth from under the ground and require the property to have a sizeable garden. They
work by transferring stored heat from the soil, using a long pipe that is drilled under the ground or buried in a trench. Access for the
drilling or digging equipment is essential. The installation process is disruptive but is mainly limited to the garden. GSHP are often
more efficient than air source heat pumps when the outside temperature is low, and are able to provide cooling in summer.
A solar water heating system will require five square metres of roof space facing east to west through south, so that it receives
direct sunlight for the main part of the day. Savings are moderate as the system can provide most of a home’s hot water in the
summer, but much less during colder weather. The panels don't have to be mounted on a pitched roof however; they can be fixed
to a frame on a flat roof or be hung from a wall. The existing heating cylinder will need to be replaced during its lifetime. It can
be installed with minimal internal disruption and usually does not require planning permission. However considerations such as
the structural conditions of the roof, access for maintenance and implications on insurance and mortgage conditions should be
considered.
Comments
5.0
Funding energy efficiency improvements
5.1Introduction
How does it work?
Obtaining consents
What are the advantages?
Landlords who wish to improve the energy efficiency
of their property may be able to access funding
support from a variety of sources. Some of these
are offered UK-wide, whilst others are offered by
devolved administrations or local authorities. This
chapter looks at the most significant schemes in terms
of size and geographical spread.
All Green Deals commence with an impartial
assessment of the fabric of the property and an
occupancy assessment, which takes into account
the way the current occupier uses the property. This
assessment must be carried out by an accredited
Green Deal Assessor, and the resulting Green Deal
Advice Report will identify a package of energy
efficiency improvements with estimates of likely
energy savings. The party initiating the Green Deal,
which could be the landlord or the tenant, will then
be able to seek quotations for the measures from
authorised Green Deal Providers, who will offer a
financing package to implement an agreed package
of measures under a Green Deal Plan. A Green Deal
Plan can spread the cost of the improvements over
time by adding a standing charge to the property’s
electricity bill. Green Deal Providers will arrange
for the installation of improvements agreed under
a Green Deal Plan using accredited Green Deal
Installers to ensure that the works are carried out to
a high standard.
There may be multiple parties who need to provide
consent to a Green Deal depending on the property,
tenure and type of measures being installed. The
improver (i.e. the person seeking to undertake a Green
Deal), which could be a landlord or tenant, is responsible
for gathering all the consents and permissions that may
be necessary, including consent from the property’s
energy bill payer (i.e. the person registered as the bill
payer with an energy company), the property owner,
and any other relevant third party such as a lender.
+ It provides access to funding for energy efficient
In rented property, the energy bill payer will often
be the tenant and, as such, a landlord would need to
obtain their consent to a Green Deal. However there
may be situations where the landlord, and not the
tenant, is the energy bill payer and therefore tenant
consent would not be required. This includes void
periods when the landlord is the bill payer at the point
of signing up for a Green Deal (as long as a tenant
has not yet agreed to rent the property), and where a
landlord pays a property’s energy bill and incorporates
the cost in the rent or service charge. In the latter
senario, the landlord may however still need to gain
agreement from tenants to pass through the Green
Deal charge, depending on the wording of the lease or
service charge agreement.
+ Green Deal Providers must provide warranties and
Information about all sources of funding can be
obtained from the Energy Savings Trust website,
which has a searchable funding database16.
Unlike a commercial loan, Green Deal debt stays with
the property and obliges whoever is the current payer
of the electricity bill to pay the Green Deal charge.
Should an energy bill payer stop paying their bill
including Green Deal charges, the resulting debts stay
with that bill payer and do not transfer to subsequent
bill payers.
The Energy Savings Advice Service also provides free
impartial advice on energy saving opportunities and
funding options across the UK and can be contacted
on 0300 123 1234.
5.2
The Green Deal
What is it?
The Green Deal is the government’s flagship scheme
for encouraging energy efficiency improvements. A
key feature of the Green Deal is the ‘pay-as-yousave’ funding mechanism, which allows the cost of
improvements to be paid for over time through the
savings generated on the property’s energy bills. This
means that the landlord avoids upfront costs and the
obligation to make repayments falls to tenants whilst
in situ, and the landlord during void periods17. The
Green Deal is available in England, Scotland and Wales.
There are a number of key requirements for a Green Deal.
During any period where the property is unlet, the
obligation to pay the ongoing Green Deal charge
reverts to the landlord. Green Deal charges are made
regardless of whether any energy is being used.
Satisfaction of the ‘Golden Rule’
Disclosure
The Golden Rule is a fundamental principle of
the Green Deal, which limits the total cost of the
improvement measures, plus the finance charged
by Green Deal Providers, to the estimated savings
expected to be generated as a result of the
improvements. So for example, if a property’s annual
energy bill is £800, then the total cost of the energy
bill after the measures are installed and the Green Deal
charge is added, must be £800 or less. The savings
could be in the form of reduced gas bills, electricity
bills or both, but the charge is always added to the
electricity bill. The assessment of the Golden Rule
will be based on a number of standard assumptions
about energy use, with reference to the property type
and performance of the measures. An accompanying
occupational assessment will indicate what the
implications of a Green Deal will be on the energy bill
for the current occupier of the property.
Landlords must disclose information about the
existence of a Green Deal on a property to any
potential buyer or incoming tenant, so that they
are aware that they will be liable for the Green Deal
charge and bound by the terms of the Green Deal
Plan. Written acknowledgement will need to be
obtained to prove disclosure requirements have been
met. If a landlord does not adequately disclose a
Green Deal and gain written acknolwedgement from
an incoming tenant or property buyer, such tenants
or buyers could have the Green Deal Plan removed.
This would result in the Green Deal Provider seeking
compensation from the landlord for losses. Detailed
rules on these requriements are to be provided by the
Department of Energy and Climate Change (DECC).
16 http://www.energysavingtrust.org.uk/funding/search
17 Assuming the tenant and not the landlord is the named bill payer registered with an energy supply company
What measures does it cover?
The Green Deal can fund lighting, space heating and
cooling, building fabric, water heating and microgeneration improvements, provided that the Golden
Rule is satisfied.
measures with no upfront costs to the landlord
or tenant. Where there is a tenant in situ, it is the
tenant who makes the Green Deal repayments
through their electricity bill
+ If a tenant stops paying an energy bill that includes
a Green Deal charge, both the energy bill debt and
the Green Deal debt built up by the tenant stay
with the tenant
guarantees for the work and must resolve any
defects that arise
+ Larger landlords could become Green Deal
Providers and obtain an income stream from Green
Deal finance, possibly delivering improvements
beyond their own stock.
What are the disadvantages?
- The Green Deal charge is a standing charge on the
electricity bill and is payable no matter how much
energy is used in the property. During void periods
the landlord is responsible for the repayments
- The Green Deal loan will have to be repaid if the
property is redeveloped or demolished whilst
Green Deal debt remains on the electricity bill
- Consent is needed from both the energy bill payer
and the property owner for the Green Deal to be
taken out. This could add time
- Unless the landlord exerts control through the
Green Deal process, the installation of different
measures and materials could complicate property
management and maintenance
- When the energy bill payer changes, for example
through a change of tenant, the landlord is obliged
to disclose details of the Green Deal to a new
tenant, who has to acknowledge responsibility
for the repayments in writing (which can be done
through the tenancy agreement)
- It is not yet known what impact on property values
Green Deal debt will have.
Where can I find further information?
DECC has a Green Deal section of its website18 and
has produced a number of quick guides19. The Green
Deal Oversight Body also lists all those organisations
registered as Green Deal Assessors, Installers and
Providers on its website20.
18 http://www.decc.gov.uk/en/content/cms/tackling/green_deal/green_deal.aspx
19 http://www.decc.gov.uk/en/content/cms/tackling/green_deal/gd_quickguides/gd_quickguides.aspx
20 http://www.greendealorb.co.uk
24
Funding energy efficiency improvements
5.3
The Green Deal Cashback Scheme
What is it?
Where landlords commission a Green Deal Assessment
and have work arranged through a Green Deal
Provider, whether paid for upfront or with Green Deal
finance, they may be eligible for a government funded
cashback. The government has allocated £ million
for the scheme to support take up of improvements
delivered through the Green Deal in the early stages
of roll out in 2013. The Green Deal Cashback Scheme
is available for England and Wales. Scotland has a
separate ‘Green Homes’ incentive scheme, details
of which are available on the Energy Saving Trust
website21.
How does it work?
Cashback is awarded for each qualifying measure
recommended by a Green Deal Assessment that is
installed through a Green Deal Provider. Landlords
are eligible for the cashback where they pay for
improvements upfront, or take out Green Deal
funding whilst they are the electricity bill payer, such
as during void periods or where they recharge tenants
for energy costs. If the package of improvements is
undertaken when there is an electricity bill paying
tenant in situ, it will be the tenant that receives the
cashback. Where improvements are funded in part
by a landlord upfront and in part through Green
Deal finance, if there is a bill paying tenant in situ,
the cashback will go to the tenant if the majority of
the costs are met through Green Deal finance, and
the landlord if the majority are met by the landlord
upfront.
To qualify for the cashback, householders must:
• have a Green Deal Assessment carried out on the
property
• get and agree quotes from a Green Deal Provider
(this could be directly with a national brand or
through a local tradesperson linked with a provider)
• apply for a cashback voucher online or by phone –
to make things easier, some providers will be able
to apply on behalf of their customers
• receive a voucher confirming the cashback
There are a number of other eligiblity requirements,
including:
• where a Green Deal Assessment recommends
loft and cavity wall insulation, cashback will be
contingent on such measures being included in the
improvement package
• cashback will be capped at 50% of the applicant’s
installation costs
• landlords will have to certify that receiving
cashback would not result in them breaching State
Aid rules, which limit the amount of public money
they can receive over a rolling three year period
(currently around £160,000) 22
• work must be done within a specified period – six
months for solid wall insulation, three months for
other improvements, and in all cases before 31
March 2014 to claim the cashback.
What measures does it cover?
Most key Green Deal measures are eligible for
cashback, including loft and cavity wall insulation and
boiler replacement (where not already required under
building regulations). Each qualifying measure has a
unique cashback value. To view the list of qualifying
measures and amount of cashback, please see DECC’s
quick guide23.
What are the advantages?
+ Cashback could be used to part fund the
improvement works, reducing the overall cost and
the size of any Green Deal debts placed on the
electricity bill
5.4
The Energy Company Obligation
What is it?
The Energy Company Obligation (ECO) works
in tandem with the Green Deal to make certain
expensive improvement measures affordable, and
deliver measures for low income and vulnerable
households and communities. The ECO is divided into
three pots as follows:
• the Carbon Emissions Reduction Obligation (around
£760m per year) – to focus on solid wall insulation
and hard to treat cavity wall insulation where Green
Deal finance alone is insufficient
• the Carbon Saving Community Obligation (around
£190m per year) – to provide energy and carbon
savings measures to households in the most
deprived areas (i.e. the bottom 15% measured on
the English, Welsh and Scottish indices of multiple
deprivation)24
• the Home Heating Cost Reduction Obligation
(around £350m per year) – to pay for measures
that reduce the cost of heating for low income,
vulnerable households at risk of fuel poverty (e.g.
heating systems and basic insulation) for owner
occupiers and those in the private rented sector;
to receive assistance under this obligation the
householder must be in receipt of a qualifying
means tested benefit.
The ECO is available in England, Scotland and Wales.
How does it work?
What are the disadvantages?
Energy companies may target households directly
or in partnership with others in delivering their
obligations. Where a property or household is eligible
for ECO funding, Green Deal Providers may include
such funding in their Green Deal offers to property
owners.
- Cashback received by landlords must be treated as
What measures does it cover?
+ Cashback could be used to help convince existing
tenants to agree to a Green Deal Plan.
taxable income, reducing its value
- Landlords must undertake a Green Deal Assessment
and go through a Green Deal Provider to be eligible.
Landlords would not be able to use any preferred
contractors operating outside the Green Deal.
• complete the works within the specified period
• the Carbon Saving Community Obligation will
support insulation measures including loft
insulation, cavity wall insulation or solid wall
insulation
• the Home Heating Cost Reduction Obligation will
support the installation of measures that result in
a notional bill saving; it is anticipated that energy
suppliers will install the most cost effective
packages of measures, including loft or cavity wall
insulation, and heating improvements such as a
boiler repair or upgrades.
What are the advantages?
+ Solid wall insulation is likely to result in a significant
improvement to a property’s EPC rating, thermal
performance and reductions in tenant energy bills
+ External wall insulation may improve the
appearance of the property and thus be more
attractive to prospective tenants or buyers
+ Energy companies will be seeking to meet their
obligations at the lowest cost. Landlords with
large portfolios may be able to negotiate multiple
packages of improvements.
What are the disadvantages?
- The Home Heating Cost Reduction subsidy is
provided on the basis of the tenant’s circumstances,
which the landlord is unlikely to know and may find
difficult to determine
- The Home Heating Cost Reduction funded
improvements must be undertaken when there
is a qualifying tenant in situ, which may cause
disruption
- Internal wall insulation is likely to require vacant
possession to install.
Where can I find further information?
Depending on household and property circumstances:
• the Carbon Emissions Reduction Obligation will
To explore eligibility in more detail, landlords can
speak with a Green Deal Provider, local authority
or the independent Energy Savings Advice Line on
0300 123 1234.
pay for hard to treat cavity walls, internal solid
wall insulation, or external solid wall insulation;
additional measures could be funded too if they are
delivered as part of a package that includes one of
the aforementioned wall insulation measures
• redeem the voucher, along with evidence of works
completed, for cashback.
21 http://www.energysavingtrust.org.uk/scotland/
22 Please see the Department for Business Innovation and Skills Frequently Asked Questions paper for more information on State Aid rules
23 http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/green-deal/6715-the-green-deal-cashback-for-energy-saving.pdf
24 http://www.decc.gov.uk/assets/decc/11/tackling-climate-change/green-deal/6968-energy-company-obligation-carbon-saving-community.pdf
26
Funding energy efficiency improvements
5.5
The Landlord Energy Savings Allowance
What is it?
The Landlord Energy Savings Allowance (LESA) allows
up to £1,500 to be claimed against tax every year
for the costs of buying and installing certain energy
saving products for rented properties where Green
Deal finance is not used. LESA is claimable for each
demise so if a landlord rents out a property containing
four flats, it is possible to claim up to £1,500 for each
flat. LESA is due to expire on 6 April 2015 and it is
not yet known whether it will be extended. LESA is
available across the UK.
How does it work?
Once the work is complete, corporate landlords can
claim the allowance under allowable business expenses
on their corporation tax return form, and individual
landlords can claim it on their self assessment
income tax return. Landlords can only claim for the
expenditure that benefits the residential property that
they let, so expenditure may need to be apportioned
where a landlord installs energy saving items
benefitting other areas of the property. It is possible
to split a package of improvements so that some are
paid for upfront by the landlord with LESA relief, and
some paid for using Green Deal finance.
- LESA is currently limited to £1,500 per demise,
which will not cover significant works
- Awareness of LESA amongst landlord accountants
is low. Landlords may need to inform their
accountants of their intention to use LESA in their
tax returns.
Where can I find further information?
HMRC has produced a guidance document detailing
the full requirements and benefits of LESA (reference:
PIM2072), which is available on its website25.
5.6
Reduced VAT for energy efficiency improvements
What is it?
Some energy efficiency improvements and microgeneration measures are eligible for a reduced rate
of VAT (currently 5%). The lower rate applies to the
cost of installation, the materials themselves and
any additional work that needs to be done as part
of the installation, for example creating a new hatch
to access the loft. However, the lower rate does not
apply where only the materials are purchased, such as
where landlords intend to do the work themselves, or
where the energy efficiency measures are installed as
part of a larger project, such as building a new roof
or an extension. The reduced rate of VAT is available
across the UK.
What are the advantages?
+ Reduced VAT is available for qualifying products
whether paid for upfront or with Green Deal
finance
+ No paper work is required as the reduction should
be applied before payment.
What are the disadvantages?
- The reduced rate does not apply to DIY sales, so
landlords doing works themselves cannot benefit
- Boilers and glazing are excluded
- Landlords may need to check that a reduced rate
has been applied to the bill.
Where can I find further information?
HMRC has produced a guidance document detailing
the full requirements and benefits of the reduced rate
of VAT (reference: Notice 708/6) which is available on
its website26.
5.7
The Feed-in Tariff scheme
What is it?
The following measures are eligible for LESA: loft
insulation, cavity wall insulation, solid wall insulation,
draught proofing, hot water system insulation, floor
insulation.
How does it work?
The installer should automatically apply the reduced
rate of VAT to the bill for the work.
The Feed-in Tariff (FIT) scheme enables owners of
small scale renewable energy installations to earn
an income from the energy they generate. FITs are
paid for both the energy generated and the energy
exported to the electricity grid. FIT rates are index
linked and are paid for a set period, depending on the
nature of the installation. FITs are available in England,
Scotland and Wales.
What are the advantages?
What measures does it cover?
How does it work?
+ LESA offers tax relief for those who would rather
Installation of any of the following: controls for central
heating and hot water systems, draught insulation
(e.g. around windows and doors), insulation on walls,
floors, ceilings, lofts, etc; solar panels, wind turbines,
water turbines, ground source heat pumps, air source
heat pumps, micro combined heat and power units,
and wood fuelled boilers. The reduced rate does not
apply to boilers or glazing.
Once a Microgeneration Certification Scheme (MCS)
accredited generating technology is installed, landlords
must ask the MCS installer to register the property
and the property owner on the central MCS database
so a certificate confirming MCS compliance can be
issued. Landlords must then inform their chosen FIT
supplier27 that they wish to register and send them
a completed application form along with the MCS
certificate and, for solar PV, the Energy Performance
Certificate for the property. Once the relevant
paperwork has been submitted and cross referenced,
the FIT income will be provided to the owner of the
system or a nominated recipient, on a quarterly basis.
In the case of solar PV, the property’s EPC must be at
a D rating or above to obtain the full rate applicable to
the size of the system.
What measures does it cover?
pay for improvements upfront and avoid the Green
Deal process
+ Financing works with LESA relief does not require
the agreement or involvement of tenants
+ LESA could be used for part of a package of
improvements, with the other part financed via the
Green Deal
What are the disadvantages?
- LESA only provides a tax relief and still requires
upfront financing of works, which may be a barrier
for some landlords.
The generation tariffs will be reduced over
time (quarterly for solar PV, annually for other
technologies), depending on the level of uptake in
the previous quarter. This only affects new systems
at the point of registration – once a system has been
installed and registered the tariff is guaranteed and
RPI linked for its lifetime.
In England, Wales and Scotland, planning permission
is not required for most small scale solar PV systems
but it is recommended that before installing solar
PV panels, landlords check with their local planning
officer, especially if the property is a listed building,
or in a conservation area or World Heritage Site.
Landlords should also check with their property
insurance provider and mortgage lender that they are
permitted to modify their property to accommodate
the system, for example adding solar panels to the
roof. It is possible that such changes could impact on
insurance cover and/or the value of the property.
FIT payments are always paid to the owner of the
system or nominated recipient. This can cause
confusion where the solar panels are attached to the
roof structure in such a way that it could be argued
that the tenant is the ‘owner’ of the installation. To
deal with this, one of the following approaches can be
adopted:
• the roof and airspace above it is excluded from the
occupation lease of the property so the tenant has
no right to that part of the property and cannot be
owner of panels sitting in that part of the property
• the roof is part of the demise, but the occupation
tenant signs a waiver of any right to receive FIT
payments, instead nominating the landlord to be
the recipient
• the lease of space on the roof and airspace above
it to the third party expressly states that the panels
are not intended to become fixtures just by their
attachment to the roof, and a statement that the
owner of the panels is the third party tenant of
the roof; this should combat any argument by
the occupation tenant of the property that the
panels are (as fixtures) part of the structure of the
property and are owned by that occupation tenant.
26 http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType=document&id=HMCE_
25 http://www.hmrc.gov.uk/manuals/pimmanual/pim2072.htm
CL_000514#P172_16264
27 FIT suppliers include the main energy companies. For the full list of FIT suppliers check Ofgem’s webpage - http://www.ofgem.gov.uk/SUSTAINABILITY/ENVIRONMENT/FITS/RFITLS/
Pages/rfitls.aspx
28
Funding energy efficiency improvements
In the private rented sector, the most common type
of installation is an array of solar PV panels on the
roof of the property. They are usually funded in one
of two ways.
• The landlord pays for the solar panels and their
installation and permits the tenants of the property
to draw on the electricity generated (for free or at
a low cost). The landlord enters into an agreement
with an electricity supplier to accept into the
grid all the surplus electricity generated and the
electricity supplier pays the FIT to the landlord. The
landlord may do this for one particular property,
or for a group of properties, with one agreement
between the landlord and the electricity supplier in
relation to all properties. Typically, social housing
landlords will use this group approach
• The landlord cannot afford the capital investment
required to purchase the solar panels so they grant
a lease of the roof and the airspace above it to a
third party which installs the panels on the roof at
its own expense. The landlord (or its occupation
tenant of the property) is entitled, under the lease,
to draw electricity that is generated by the solar
panels, free or at a very low cost. The third party
installer takes the FIT, both for the full amount of
electricity generated and for whatever is left to
export to the grid.
What measures does it cover?
The eligible technologies for FITs are anaerobic
digestion, hydro, micro combined heat and power,
solar PV and wind.
What are the advantages?
+ FIT income is guaranteed for a set period (20 years
for solar PV) and is RPI index linked
+ Renewable energy generation can reduce tenant
energy bills as they require less energy from energy
suppliers, and so could be used as unique selling
point when advertising a property for let
+ FIT payments are made for electricity used in the
property and any electricity exported to the grid.
Where the landlord is the owner of the system,
this may provide a useful income stream during
void periods.
28 http://www.ofgem.gov.uk/Sustainability/Environment/fits/tariff-tables/Pages/index.aspx
29 http://ld.practicallaw.com/8-503-4067
30 http://www.hmrc.gov.uk/manuals/bimmanual/bim40510.htm
What are the disadvantages?
How does it work?
What measures does it cover?
- FIT income that applies to landlords will be subject
The RHPP provides grant funding to go towards
the cost of certain MCS accredited renewable heat
measures that were commissioned for the first time on
or after 21 July 2011. The grant values are as follows:
The eligible technologies for the RHPP scheme are:
ground source heat pumps, air to water heat pumps,
biomass boilers, biomass pellet stoves with back
boilers, and solar thermal panels. The final list of
technologies eligible for the RHI will not be known
until the government has issued its response to its
consultation, however it is expected that all those
systems eligible through the RHPP will also be eligible
for the RHI.
to income tax or corporation tax (depending on
whether it is an individual or a company)
- There will be ongoing maintenance costs to offset
against the income. Solar PV panels for example
will require replacement of an inverter (current
cost around £1,000) and cleaning during their
lifetime
- The income stream is adversely affected if the
amount of energy generated drops. This can occur
due to atmospheric conditions (for example for
solar PV a lack of sunshine, or shading caused by
buildings or trees)
- Consent needs to be sought from insurers and
mortgage companies before the technology is
installed.
Where can I find further information?
Please see Ofgem’s Feed-in Tariff website for the
latest tariffs28. The Practical Law Company has a
toolkit for property owners on the Feed-in Tariff on
its website29. HMRC has a guidance note on the tax
treatment of FIT income on its website30.
5.8
The Renewable Heat Premium Payment and Renewable Heat Incentive
What is it?
Similar to the FIT, the Renewable Heat Incentive
(RHI) provides a tariff based income for all renewable
heat generated and used within a property, and any
heat exported to a heat network, should there be
one available. It is currently available only for nondomestic properties or district heating networks, but
is due to be available for single domestic properties in
the summer of 2013.
Until the RHI is launched for single domestic
properties, landlords are able to access the Renewable
Heat Premium Payment (RHPP) scheme, which
provides vouchers to help with the capital cost of
renewable heat technologies. The RHPP will end on
31 March 2013, but may finish earlier depending on
how much of the £7 million available has been taken
up. The RHPP and RHI are available across the UK, but
operate differently in Northern Ireland.
• air source heat pumps: £850 (available for any
property)
• biomass boilers: £950 (available for properties off
the gas grid)
• ground source heat pumps: £1,250 (available for
any property)
• solar water heating: £300 (available for any property).
Vouchers are allocated following an application
process, which is managed by the Energy Saving
Trust. The vouchers are then surrendered following
the successful commissioning of an eligible system in
return for the RHPP grant. On condition of receiving
the vouchers, landlords must provide feedback on the
system as required, involving online surveys and the
use of a heat meter, which provides data directly to
DECC. All successful applicants need to meet certain
criteria involving existing levels of loft and cavity wall
insulation. In theory, tenants as well as landlords could
apply for vouchers under the scheme, although tenants
would need to obtain their landlord’s consent first.
Most installations are classed as permitted
development, which means planning permission is
not needed, but this will depend on the technology
and the location of the property. Before proceeding,
landlords should check they have all the required
permissions and that they satisfy building regulations.
The RHI, when launched in summer 2013, will provide
an income stream for renewable heat produced and
used within a property, and any heat exported to a
heat network. The scheme will be similar to the FIT
scheme for renewable electricity. The government
has issued a consultation on the detail of the scheme
and has proposed that, in order to be eligible for the
RHI, properties will have to reach certain basic energy
efficiency standards.
What are the advantages?
+ RHPP vouchers could significantly reduce the upfront
cost of installing renewable heat improvements
+ Renewable heat could reduce tenant energy bills,
providing a unique selling point when advertising a
property for let
+ By installing renewable heat technology now with
RHPP assistance, the property will be in a good
position to apply for the RHI when it goes live in
summer 2013.
What are the disadvantages?
- RHPP grant funding is limited and eligibility for
vouchers is not guaranteed
- Before receiving the RHPP, landlords must agree to
respond to online surveys and allow data from heat
meters to be provided to DECC for monitoring
- Renewable heat technologies are not as well tested
as renewable electricity ones. Part of the reason
for the RHPP scheme is to allow the government to
learn from case studies ahead of the introduction
of RHI for domestic properties.
Where can I find further information?
Please see DECC’s RHPP and the RHI webpage31 for
the latest information on the two schemes. To begin
an application for the RHPP in England, Wales or
Scotland, go to the Energy Saving Trust website32. For
information on the Northern Irish RHI and RHPP, visit
the Northern Irish government’s website33.
31 http://www.decc.gov.uk/en/content/cms/meeting_energy/Renewable_ener/incentive/incentive.aspx
32 https://www.energysavingtrust.org.uk/scheme/view/rhpp
33 http://www.nidirect.gov.uk/renewable-heat-premium-payment-rhpp.htm
30
No
Yes
Yes
• what level of disruption each measure will involve
As set out in chapter two, the importance of energy
efficiency in the private rented sector is likely to grow
over the next few years. New regulation, in particular
plans to provide tenants with a right to request
energy efficiency improvements from April 2016 and
to make it illegal to let energy inefficient property
as determined by the EPC from April 2018 (details
still to be announced), are likely to have a significant
impact on the sector. However energy efficiency is
not just about getting ready for legislation – there
are clear opportunities to fund energy efficiency
improvements at no upfront cost to landlords, as
outlined in chapter five.
• when each measure, or package of measures,
What should landlords do now?
No
Landlords who are interested in making energy
efficiency improvements would be well advised to
develop a plan for evaluating their portfolio and
identifying what measures should be installed, when
and how they should:
Survey properties
* Possibly eligible when delivered as part of a package of improvements with solid wall insulation or hard to treat cavity wall insulation
** Eligible for gas powered systems up to 2kW in size only
No
No
Wind turbine
Yes
Yes
No
No
No
Renewable
electricity
Solar photo-voltaics (PV)
Yes
Yes
No
No
No
Biomass boiler
Yes
Yes
No
No
No
Air source heat pump
Yes
Yes
No
No
No
Ground source heat pump
Yes
Yes
No
No
No
Renewable heating
Solar heating
Yes
Yes
No
No
No
Under floor heating
No
Yes
No
No
No
Micro combined heat and
power (CHP)
Yes
Yes
No
No
No
Heating controls
Yes
Yes
No
No
No
Boiler replacement
No
Yes
No
No
No
Heating and hot
water
Heating system
replacement
No
Yes
No
No
No
Lighting
Efficient lighting
No
Yes
Yes
Maybe*
No
Window glazing
Triple, double or secondary
glazing
No
Yes
Yes
Maybe*
No
Insulated external doors
No
Yes
Yes
Maybe*
Yes
Draught proofing
Yes
Yes
No
No
Yes
Hot water system
insulation
Yes
Yes
Yes
Maybe*
Yes
Loft insulation
Yes
Yes
Yes
Maybe*
Yes
Floor insulation
Yes
Yes
Yes
Yes
Yes
Internal solid wall
insulation
Yes
Yes
Yes
Yes
Yes
External solid wall
insulation
Yes
Yes
Yes
Maybe*
Yes
Yes
Yes
Insulation
Cavity wall insulation
Landlord’s Energy
Savings Allowance
Green
Deal
6.1Summary
6.2
Reduced
VAT
Measure
Measure category
Developing a suitable strategy
No
No
Yes
No
No
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Yes
No
No
Yes
No
No
Maybe**
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
No
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
No
No
Yes
No
Renewable
Heat Incentive
Renewable
Heat Premium
Payment
Feed-In
Tariff
Home
Heating
Cost
Reduction
Obligation
Carbon Saving
Community
Obligation
Carbon
Emissions
Reduction
Obligation
Table 2. Funding support schemes for energy efficiency and renewable energy production
6.0
In order to know the extent to which energy
efficiency improvements could be made, it is advisable
to first commission property surveys, carried out
either by a Green Deal Assessor (who will produce
a Green Deal Advisory Report) or a Domestic
Energy Assessor (who will produce an EPC). Some
existing EPCs were conducted without a thorough
investigation of all the aspects of a property, with
default values included. This may mean that, should
the property ever require reassessment, the rating
could be significantly different. If landlords consider
that they have EPCs that may not have been
conducted thoroughly, it may be beneficial to obtain
new ones, or obtain a Green Deal Advisory Report,
before implementing any improvements.
would best be implemented.
Developing a long term plan for a property will
allow landlords to identify the points at which
energy efficiency works would be most suitable.
For example, works could be programmed into a
void management regime, helping to capitalise on
periods when the property is likely to be empty, thus
avoiding disruption to tenants and the need to obtain
their consent to works and any Green Deal charges.
Works could also be planned whilst undertaking other
property upgrades, such as fitting a new kitchen or
bathroom. Alternatively, landlords could decide to plan
incremental changes that minimise the time in the
property and the need to secure access.
Secure funding
Each funding option will have its own requirements in
terms of eligibility criteria and administration. Once a
landlord has decided to fund a package of works, they
will need to ensure they follow the relevant process.
For the Green Deal, landlords need to factor in the
need to obtain the bill payer’s consent to the Green
Deal charges, and the obligation to pay such charges
during void periods.
Manage expectations
Landlords could easily find themselves on the back
foot, with tenants seeking early consent for Green
Deal and Energy Company Obligation (ECO) works.
Landlords may wish to set ground rules for energy
efficiency improvements, for example, ensuring
consistency across the stock and recognising
the landlord’s ongoing maintenance obligations.
Alternatively, landlords may wish to control the works
directly and manage tenant expectation by clarifying
their own plans for energy efficiency improvements.
Develop plans
Having identified appropriate improvement measures
following a property survey, landlords will need to
consider:
• the cost of the recommended improvements
• what funding and tax relief schemes are available
for each measure
• what may be required in order to obtain any
relevant funding or tax relief
• how long each measure is likely to take to install
Develop procedures
Some funding schemes and improvement measures
will require landlords to develop procedures to follow.
For example, if a Green Deal is entered into, then the
landlord will be obliged to disclose its existence to
new tenants. They will also need to ensure that any
sale contract, tenancy agreement or lease includes
an acknowledgement that the incoming buyer/tenant
will pay the Green Deal charges and be bound by
the Green Deal Plan. Similarly, solar panels may need
periodic maintenance, such as the replacement of the
inverter during their lifetime, and any Feed-in Tariff
transfer will need to be taken into account when
selling a property.
32
Annex A – When Energy Performance
Certificates are required (England and Wales)
Responsibility for providing EPCs
The obligation to commission an EPC, where a valid
one does not already exist, lies with the person who
proposes to sell or rent out a property, which in the
private rented sector will be the landlord. Where the
landlord has to commission the EPC, there must not be
a charge to the prospective tenant for any of the costs
(even once the tenancy is taken). Once issued, an EPC
lasts for 10 years or until alterations to a property
occur requiring a new EPC to be issued. Once created,
EPCs are lodged and made available on the EPC
Register34 which is open to the public, allowing anyone
to download a copy of a property’s EPC, either by
entering the property’s address or the EPC’s 24-digit
Report Reference Number. Landlords can however
request that their EPC is not made publicly available
on the EPC register.
Duties involving EPCs are also imposed on people who
‘act on behalf’ of the landlord, for example the letting
agent or sales agent, to ensure that the EPC is obtained
and made available to the prospective tenant. This
guide does not address these responsibilities.
Please note that where a property has a Green
Deal, additional disclosure and acknowledgement
requirements are required which are not covered
within this section. Detailed guidance on these
requirements can be found on the DECC website.
When an EPC must be commissioned
An EPC should be commissioned before a property
is put on the market, and the landlord must use
reasonable efforts to obtain the EPC within seven
days of the start of marketing. A property is put
on the market when it is first made public that the
property is, or may become, available for sale or rent
(by whatever means – it does not have to be formal
advertising). It is enough that a section of the public
becomes aware of this fact, not the general public.
The landlord has commissioned the EPC if they have
requested an accredited domestic energy assessor
to produce the EPC, have provided all the necessary
information and either paid for the EPC or agreed
to pay for it. If, despite commissioning the EPC, it is
still not available after seven days, then marketing
can continue, but the EPC must be obtained within a
further 21 days. If the EPC has not been obtained by
28 days from the start of marketing, the landlord will
be guilty of an offence.
When the EPC rating must appear in adverts
As of 9 January 2013 there is no longer a requirement
to attach the first page of an EPC to any written
particulars about a property designed for persons who
may be interested in buying or renting it. Instead,
where a valid EPC exists, the EPC rating must be
stated in any advertisement of the proposed sale or
rental of the property which appears in commercial
media. The full A-G graph should to be used where
there is adequate space.
There is no definition of commercial media in the
EPC Regulations, however government guidance35
describes it as newspapers, magazines, the internet
and any written material produced by the landlord/
seller/agent that describes the building being
offered for sale or rent. However this may not be an
exhaustive definition.
When a full copy of an EPC is required
A copy of a valid EPC must be made available to a
serious prospective buyer or tenant, free of charge,
at the earliest opportunity. The very latest it can be
provided is either the point:
• at which the landlord gives any written information
about the property to that prospective buyer or
tenant in response to their request for it, or if earlier,
• that the prospective buyer or tenant views the
building in person.
Even if the prospective buyer or tenant does not ask
for information or to view the property, the landlord
must still make a copy of the EPC available to them at
the earliest opportunity. Landlords cannot delay doing
so until just before exchange of contracts. Regulation
6(5) says that a valid EPC must be given to the person
who ultimately becomes the buyer or the tenant.
When EPCs are not required
Penalties for non-compliance
The EPC regulations and accompanying guidance give
a number of examples where the duties above do not
apply. Common ones include where:
Trading Standards Officers are responsible for
enforcement. The penalty charge is £200 but this
cannot be imposed more than six months after the
date of the breach.
• there is already a valid EPC and therefore there is
no need to commission a new one
• the building is not yet fully constructed (an EPC is
not required for purchases off plan)
• the building has no space heating or ventilation
system (the EPC regime only applies to buildings
that use energy to condition the internal climate)
• only part of the property is being let
For further information
The latest EPC Regulations (in force from 9 January
2013) are The Energy Performance of Buildings
(England and Wales) Regulations 2012 (SI 2012 No
3118). The Department for Communities and Local
Government (DCLG) has published extensive guidance
on the requirements of the latest set of regulations on
its website37.
• if the property is used for holiday lets and is let out
for less than four months a year
• a licence only (not a lease) is to be granted for the
property
• the property was let to the current tenant before
1 October 2008 and they have remained in
occupation ever since
• the lease is renewed to the same tenant
• the lease is for no value, whether in monetary
terms or any other consideration
• as of 9 January 2013, listed buildings may no
longer be required to have an EPC for sale or rent.
If the prospective buyer or tenant agrees to it, a copy
of the EPC can be made available electronically (via a
link which the landlord supplies). Government guidance
suggests that the landlord keeps an audit trail recording
such an agreement36. Alternatively a hard copy of the
EPC can be given to the prospective buyer or tenant
or made available for inspection at some reasonably
convenient place (for example, the letting agent). It can
be reproduced in a reduced size as long it is legible and
can be in colour or black and white.
A landlord is not required to provide a copy of the EPC
in accordance with this timetable, if:
• the landlord has commissioned the EPC but it has
not yet been issued by the assessor, despite the
landlord’s reasonable efforts and enquiries (and the
28 day period from the start of marketing has not
yet elapsed) or,
• it was an emergency letting and there was not time to
get the EPC before the lease was completed, but it was
supplied as soon as reasonably practicable after that.
34 https://www.epcregister.com/
35 and 36
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/39375/A_guide_to_energy_performance_certificate_for_
the_construction__sale_and_let_of_dwellings.pdf
37https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/39375/A_guide_to_energy_performance_certificates_for_the_construction__sale_and_let_of_dwellings.pdf
34
Annex B – Old and new Energy Performance Certificate
front page comparison (England and Wales)
Energy Performance Certificate front page before April 2012
Energy Performance Certificate front page after April 2012
36
Note
British Property Federation
5th Floor, St Albans House
57-59 Haymarket
London SW1Y 4QX
Tel 020 7828 0111
Email info@bpf.org.uk
Web www.bpf.org.uk
Company registration number: 778293
Registered in England and Wales
January 2013 Version 1.0
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5 http://downloads.theccc.org.uk.s3.amazonaws.com/Household%20Energy%20Bills/CCC_Energy%20Note%20Bill_bookmarked_1.pdf