Calling all private landlords – Mind the Gap

It has long been the case that the interests of tenants and their landlords do not naturally align.

Anyone who is or has been a tenant or landlord will tell you their stories, often where things have gone wrong. And much has been done at a general level to improve this framework; through Assured Shorthold Tenancy (AST) agreements, deposit registration and adjudication, and gas appliance safety checks. But now government is rightly thinking about the energy efficiency of the buildings themselves.

The problem has been two-fold:

Firstly, government research shows that much privately tenanted property is existing housing stock with lower energy Band ratings, E or lower. Ownership is fragmented and it is difficult to target landlords individually.

Secondly, there is what the Green Deal calls a ‘spilt incentive’ whereby the landlord pays for the energy efficiency improvement but the tenant benefits from lower bills. And conversely it is difficult for a tenant wishing to reduce their bills and make improvements to get a landlord to listen.

There is of course a generalisation here. Some private landlords certainly recognise the benefit to them of houses that are in good repair, easily heated and where the tenants feel some sense of care in the property. But in many cases the landlord is a remote figure, the tenants have little sense of care in the rental home and their only common point is the tenancy contract. In this latter scenario, it is easy for a property to become dilapidated, energy use to be higher through poor building use or for comfort to be compromised through keeping the heating turned well down in winter to reduce the bills.

It is this 'Mind the Gap' scenario that the Green Deal seeks to address. DECC’s website summarises the changes.

“Under the Green Deal, landlords will be able to make energy efficiency improvements without having to pay for them upfront.   Tenants will repay the cost of the measures through their energy bill savings whilst enjoying a more energy efficient home.

In this way the Green Deal is mutually beneficial to both landlords and tenants.

Government will work with the sector to encourage uptake of energy efficiency measures through the Green Deal.

The Energy Act 2011 enables Government to regulate to help ensure the take up of cost effective energy efficiency improvements in the Private Rented Sector.  Government’s intention is that:

·                               from April 2016, domestic landlords should not be able to unreasonably refuse requests from their tenants for consent to energy efficiency improvements, where financial support is available, such as the Green Deal and/or the Energy Company Obligation (ECO); and 

·                      from April 2018, all private rented properties (domestic and non-domestic) should be brought up to a minimum energy efficiency standard rating, likely to be set at EPC rating “E”.  This requirement would be subject to there being no upfront financial cost to landlords. Where there are costs on landlords (such as time or hassle costs), we are committed to ensuring the benefits meet or exceed these. The intention is that landlords would have fulfilled this requirement if they had either reached “E” or carried out the maximum package of measures funded under the Green Deal and/or ECO (even if this does not take them above an “F” rating).”

So here is another example where government offers both a carrot and a stick. They offer a mechanism whereby tenant and landlord incentives can be aligned, but with the payment responsibilities defined clearly between them. 

However in my view for this truly to work, it still requires a landlord to be proactive in two ways:

1.  to lead the discussion on those energy improvements (the energy improvement plan) that make the most sense for the individual property, and; 
2.  to implement and measure their agreed energy improvement plan as a demonstration to regulators that they are compliant with the new requirements.

This means that whilst there is nothing to stop diligent landlords going beyond the minimum requirements and working with tenants to achieve common energy saving goals, there is a clear future requirement to be able to demonstrate minimum performance compliance on a regular basis.

The trick will be for landlords to find ways to bridge the 'existing gap' between tenant and landlord. In my view as both a landlord and past tenant, this is as much a psychological change in the relationship between landlord and tenant as it is part of the Green Deal. And to be effective it should be supported with simple and efficient tools that enable them to plan reasonable changes, to demonstrate compliance, and to monitor performance on an on-going basis.

Author note:

Please contact me with your thoughts and experiences, especially if any of the issues that I raise above spark any reaction with you. These are my views and my aim is to raise issues that affect you as consumer; to place you in control of your energy use and planning.