Anyone letting their flat is faced with another energy efficiency target in 2025 – achieving a minimum energy performance certificate (EPC) rating of C. But whose responsibility is it to pay for improvements?

EPCs have been with us since 2007 and are needed whenever a building is sold or let. This also applies to individual flats.

While there is currently no minimum EPC rating required for the sale of a flat, an EPC less than ten years old is still required for the transaction to be completed.

However, a poor rating is likely to lower the price and possibly deter anyone buying to let, because the EPC rules are a lot tougher for rental property. A few exceptions include listed buildings and places of worship, where a rating of E or higher is required.

Now owners of let flats are faced with another bold target: all rented properties will be required to have an EPC rating of C or better by 2025, albeit with an extra three years until 2028 for existing lets. 

With the Government estimating an average cost of £4,700 for making improvements to achieve a rating of C, owners of privately rented flats might be facing big bills. If improvements need to be made to communal areas and shared structures, such as a draughty roof, you may need to look at sharing the cost with other residents. A lease might not specifically name energy improvements as work to be paid for through service charges, so you may need to come to an agreement.

For measures like insulation of a communal loft in a small block, all leaseholders can benefit, so hopefully it will not be difficult to secure everyone’s agreement for the works to be carried out and share the costs.

Where improvement works required to reach a minimum energy performance would cost the leaseholders in a larger block significant amounts, agreement might be harder to secure, depending on the ratio of owner occupiers to letters.

By sharing energy efficiency concerns with block managers, you may find that others in the building have similar requirements. It might be that other owner-occupiers are also keen to boost their energy efficiency and comfort. They might also be mindful that improvements will make their flat easier to sell if the time comes.

Ideas for the future

In 2015, a project led by the Oxford University Law Department identified one big barrier to improving energy efficiency in blocks of flats as the large number of different parties involved. These include freeholders, leaseholders, short-term tenants, mortgagees, and management companies. It can be difficult to find a solution that suits all parties.

Their recommendations to encourage and streamline energy efficiency improvements include: 

  • A duty on the freeholder or other party having control of the building to undertake an energy efficiency survey of the whole building to identify where measures could be installed and to provide a cost/benefit analysis.
  • An independent right for leaseholders and/or freeholders to improve the energy efficiency of buildings in which they have an interest.
  • Changing leases to permit energy efficiency measures to be undertaken and the cost recovered  the service charges.

Where a lease contains a covenant prohibiting a leaseholder from carrying out alterations within a flat, overriding such a provision for energy efficiency measures.

Blocks of Flats Insurance from Gallagher

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The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.