RESIDENTIAL REAL ESTATE FOR PRIVATE CLIENTS

The government has this week changed its approach to building safety with a plan to protect leaseholders and make developers pay to fix the cladding crisis. In addition, the government’s plans for a loan scheme, which would have forced leaseholders in flats between 11 – 18 m tall to cover remediation costs themselves, is being shelved as these costs are instead to be met by the developers and companies responsible for the crisis.

Michael Gove, Secretary of State for Levelling Up, has written to the residential property developer industry on this new approach asking them to agree to:

- contribute to a dedicated fund to cover the outstanding cost of remediation of unsafe cladding on buildings between 11 - 18 m high (estimated to be some £4 bn)

- fund and undertake remediation of buildings of more than 11 m that they have been involved in developing

- provide information on buildings of more than 11 m which have historic safety defects in which they’ve played a part in constructing during the last 30 years.

Mr Gove has given the industry an opportunity to come up with a fully funded plan of action to remediate unsafe cladding on buildings between 11 - 18 m high before Easter failing which the government will be forced to impose its own solution by legislation. This is likely to be either through new levies or taxes on the industry.
Anew team is also being established to pursue and expose companies at fault, making them fix the buildings they built and face commercial consequences if they refuse. And officials will have access to a range of “tools” to force concessions from the developers, including the ability to exclude them from government-backed property and finance schemes such as Help to Buy.

Improving energy performance is crucial in the government’s drive to meet its net zero carbon emissions by 2050.
At present private rental properties must meet a minimum level of energy efficiency which is an EPC (Energy Performance Certificate) rating of E. However the government is proposing changes to this in order to help it reach its net zero target.

These proposals, which are made in the Minimum Energy Performance of Buildings Bill, are:

1.  all new residential tenancies must have an energy efficiency performance of at least EPC Band C from 31 December 2025; and

2. all existing residential tenancies must have a rating of at least EPC Band C from 31 December 2028.

What might this mean for landlords?

There will be a not insignificant cost to landlords in making the required improvements which may include replacement of gas boilers, improvement of insulation of walls and roof and installation of double or even triple glazing.

Landlords may suffer a potential loss of rental income while such improvements are being carried out if their tenants need to move out during the works.

Then there is the question whether the changes made to the property will make a return on the landlord’s investment, at least in the short term. The cost of the works for some landlords may far exceed the potential rental income.

Will the government help with the cost of any works?

It is not yet known if the government will offer financial assistance by way of grants.

Is this compulsory yet?

No. The Minimum Energy Performance of Buildings Bill has been making its way

Our office will close for the Christmas and New Year holidays at 1 pm on Thursday 23rd December.

We will re-open in the New Year at 9.30 am on Wednesday 5th January.

Very best wishes for a happy and safe festive season and a healthy and prosperous New Year

from John and the Prime Portfolio team