Landlords to be dealt a fair hand?

David Cox, NLA Policy Officer
Landlords could be forgiven for letting out a collective groan when, minister Chris Huhne MP, announced the Government are to push ahead with new measures to encourage greater energy efficiency in the private-rented sector.

But unlike some earlier initiatives, the ‘Green Deal’, is a scheme designed to provide up-front funding for energy efficiency improvements including loft, cavity and solid wall insulation, floor insulation, draught-proofing and water pipe lagging.

Traditionally landlords have proved difficult to target with energy efficiency measures as the arrangement is typically one-sided – i.e. the landlord pays and the tenant benefits; what is known by the technically minded as the split incentive.

However, this scheme looks different:

1. There will be no capital outlay for landlords. The Green Deal financing will be paid back through the utility bills. Therefore, whoever pays the utility bills, pays back the loan.
2. The ‘Golden Rule’ of the Green Deal is that the combined cost of both the utility bills and the loan must be lower than if nothing had been done – so after the measures are installed tenants will be financially better off as they are paying less in utility bills; and warmer.
3. A warm tenant is a happy tenant, and happy tenants are likely to stay or longer; which reduces void periods and the need to re-market.
4. European legislation will shortly require landlords and letting agents to put energy efficiency ratings on all property adverts. A property with a higher EPC rating should be more attractive to tenants and so using the Green Deal and installing the improvements will make it easier to let.
5. Most importantly, these measures will protect the fabric of properties. Energy efficiency improvements reduce damp, mould, condensation and damage from frozen water pipes – so reducing long-term maintenance costs.

However, the devil may yet be in the detail. As with all new legislation, the Green Deal is a carrot to encourage landlords to embrace the energy efficiency agenda. Of course, where there is a carrot there is always a stick and the Green Deal is no exception. If landlords do not take up the Green Deal, from 2015 tenants will be able to demand ‘reasonable’ energy efficiency adjustments.

The NLA has received assurances that a property’s character will be considered in relation to any required works and the ‘Golden Rule’ will remain in force ensuring that the landlord will not be expected to pay any upfront costs.

But if a landlord fails to make requested adjustments – which are practical and covered by the scheme – local authorities may be able to fine them and insist the properties are insulated.

This gives landlords a five year window to insulate their properties free of charge. It is the private-rented sector’s opportunity to prove its social conscience by tackling climate change, that it’s a tenure offering high quality accommodation – once and for all dispelling the myth that landlords don’t care about their tenants. (Not to mention an opportunity to make some otherwise costly improvements).

There may be no such thing as a free lunch – but the NLA would advise landlords to at least take a look at the menu before making up their minds.

4 thoughts on “Landlords to be dealt a fair hand?

  1. The Federation of Private Residents Association believes that this could be improved for leasehoders living a purpose built flats and would welcome the support of the NLA.
    Section 35 of the Landlord and Tenant Act 1987 already provides for long leases of flats to be varied by the Leasehold Valuation Tribunal if they are defective in certain designated ways (e.g. if the service charge arrangements are defective, or if there are inadequate provisions for insurance). We are suggesting that s 35 should be amended to provide that the failure of a lease to make adequate provision for the reasonable insulation of a property should be a ground for its variation.
    Section 35(2)(g) of the LTA 1987 (added by 162(3) of the Commonhold and Leasehold Reform Act 2002) already makes provision for additional grounds for variation of leases to be added to s 35 by Regulation, so this is a matter which could be dealt with by Statutory Instrument and not by primary legislation. Expressly providing that the lease should provide only for “reasonable” insulation would automatically mean that, in the event of any dispute arising as to whether the measures proposed were reasonable, a further application could be made to the Leasehold Valuation Tribunal under s 19 or s 27A LTA 1985 in order to resolve the issue facing blocks of flats.

  2. Thanks for the response. You raise a very interesting question – how will the Green Deal work for block of flats?

    Having met with DECC about this a number of times, the simple answer is that they don’t know! However, they have suggested amending several different Acts to get over the current regulatory constraints.

    The last news we received (at the last meeting we had with DECC – a few days ago), was that the government want to deal with the primary legislation as soon as possible and then consider what they call “the details” in the secondary legislation next year.

    We will be keeping everyone up to date with Green Deal developments so I suggest you watch this space.

    Thanks again,

    David

  3. This is one of the topics at our Sheffield NLA meeting on 11th April (6:30 for a 7:00 start at Sheffield Park Hotel). There will be plenty of opportunity to ask questions there.

    Shona

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