Housing minister declines to clarify on landlords recouping EPC costs

Housing Minister Matthew Pennycook has refused to give a clear answer on whether landlords will be able to recoup the costs of EPC upgrades.

Under the Renters’ Rights Act, tenants will be able to challenge rent increases in court. Mr Pennycook said that a Tribunal must assess the rent a property could command on the open market rather than consider costs borne by the landlord, but added that the issue would ultimately be determined on a case-by-case basis.

This appears to contradict a previous minister’s admission that landlords are permitted to raise rents to cover the expense of EPC improvements.

Tribunal will determine the open market rent

Shadow Housing Secretary James Cleverly asked Mr Pennycook in a written question: “Whether he plans to provide guidance to (a) renters, (b) landlords and (c) tribunals on whether landlords recouping upfront costs of energy efficiency measures may be a legitimate material consideration in determining the market rent for the purposes of a rent tribunal”.

However, Mr Pennycook did not provide a clear answer and insisted tribunals would determine open market rent and that landlord costs could not be directly considered, suggesting decisions must be made case by case.

He said: “Once Part 1 of the Renters’ Rights Act comes into force, tenants will have the right to apply to the First-tier Tribunal (‘the Tribunal’) to challenge a proposed rent increase.

“Where a tenant chooses to do so, the Tribunal will determine the open market rent. This is the rent that the landlord could expect to receive for the property, if they were to let it on the open market the next day.

“The Tribunal has experts who are experienced in understanding the different factors which result in the open market rent and determining whether a proposed rent is reflective of this.

“Section 14 of the Housing Act 1988 sets out the factors that must be considered or disregarded by the Tribunal when determining rents. It would not be appropriate to provide guidance beyond this to the Tribunal as to how the legislation should be interpreted, as this is a matter for the judiciary.”

Tribunal must look at the rent the property could command on the open market, rather than costs borne by the landlord

Mr Pennycook adds the government will publish guidance for landlords in due course.

He said: “When considering the proposed rent, the Tribunal must look at the rent the property could command on the open market, rather than costs borne by the landlord.

“However, the open market rent of the property could be affected by the condition of the property, among other factors. It will be for the Tribunal to make a determination in each case.

“We will publish guidance for landlords and tenants before Part 1 of the Renters’ Rights Act comes into force.”