With just four years to go until the Energy Act 2011 comes into force, I’m sure that many landlords were sweating on how to fund costly energy efficiency improvements to ensure their properties meet EU environmental standards which require accommodation to be rated E or higher on Energy Performance Certificates.
If a property fails to meet these minimum standards, then it will become unlawful to let that property and local authorities will have the power to fine residential property landlords up to £5,000 per property for any breach.
Additional regulations will be made in April 2016 compelling a residential landlord not to unreasonably refuse a request from a tenant for consent to the making of relevant energy efficient improvements to the property, the news that tenants themselves will now be able to take advantage of Green Deal finance is particularly welcome. After all, if a landlord fails to comply, the tenant will be apply to a court and seek payment of a sum of money as a result.
However, quite what insurers are going to do to respond to the changing needs of landlords is still unknown at this stage. It is likely that energy efficiency is going to have to feature on proposal forms and will affect reinstatement obligations. It will make a big difference if insurers are reinstating a home which is energy efficient rather than one which is not.
Upgrades to the property may well have an impact on their insurable value and it will be important to ensure that landlords insure their properties not only for the correct amount, but also that their policy wording ensures that any rebuilding or reinstatement meets the new requirements.
And of course if any property is going to be unoccupied for a period of time whilst energy-saving improvements are undertaken, then the landlord’s insurance policy may need to be amended to ensure there is un-occupancy cover in place for an adequate period of time.
The Energy Act impacts professional property owners with huge portfolios through to the accidental landlords and private individuals who have invested in one or two buy-to-let properties as their future pension fund – so apathy is not an option.
It’s going to be important to ensure that landlords keep their sums insured under review to ensure they are adequate for replacement and reinstatement in the event of a claim, which may need to be carried out in an energy efficient manner.
Getting rental properties in shape and adequately insured well before the Act comes into force will undoubtedly protect any landlord’s future financial wellbeing.
Kevin Paterson is managing director of Source Insurance
