The Housing Minister, Matthew Pennycook, has refused to provide a definitive clarification on whether individual landlords can guarantee recouping the significant costs of Energy Performance Certificate (EPC) upgrades via rent increases.
In a response that appears to contradict a previous ministerial stance, Pennycook insisted that the First-tier Tribunal (FTT) must focus purely on determining the open market rent for a property, rather than considering the specific costs borne by the landlord.
Tribunal Must Determine Market Rent, Not Landlord Costs
The issue was brought forward by Shadow Housing Secretary James Cleverly, who asked the Minister to provide guidance to all parties—renters, landlords, and the FTT—on whether the costs of energy efficiency measures are a “legitimate material consideration” in setting the market rent.
Mr. Pennycook declined to offer specific guidance, emphasising that the matter is ultimately for the judiciary and will be determined on a case-by-case basis.4
He stated:
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“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.”
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The Tribunal’s task is to determine the rent the landlord could expect to receive if the property were let on the open market the next day.
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The condition of the property, however, can affect the open market rent, implying that a higher EPC rating could indirectly justify a higher rental price.
The Legislative Conflict
The Minister’s refusal to issue explicit guidance leaves a critical area of the Renters’ Rights Act (once Part 1 comes into force) open to interpretation.
Under the new legislation, tenants will gain the right to challenge proposed rent increases at the Tribunal.8 The Tribunal’s decision is governed by Section 14 of the Housing Act 1988, which sets out the factors that must be considered (or disregarded) when determining market rent.9
By stating that guidance would be inappropriate beyond the existing legislation, the Minister is deferring the interpretation of how EPC-driven improvements (a condition of the property) translate into open market rent to the Tribunal’s judiciary experts in each individual case.10
This creates significant uncertainty for landlords facing potentially tens of thousands of pounds in required EPC upgrade costs. The ability to raise rent is often the only mechanism available for a landlord to service the finance used for such compulsory works.
The government confirmed it will publish guidance for landlords and tenants before the relevant part of the Renters’ Rights Act comes into force, but the Minister’s current statement suggests this guidance will adhere strictly to the principle of “open market rent” and avoid explicitly sanctioning the recouping of costs.11
The previous statement, which contradicted the current Housing Minister Matthew Pennycook’s position on recouping EPC upgrade costs, was made by Justice Minister Sarah Sackman in Parliament.
The core of her statement was that the cost of EPC upgrades is a valid factor for a rent increase when a tenant appeals to the First-tier Tribunal.
She stated that: “Expenditure on the upgrading of an energy performance certificate to a higher level of energy efficiency is a material consideration, which may result, in certain circumstances, in a higher market rent being determined.
The Contradiction
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Sarah Sackman’s position suggested that the cost incurred by the landlord could be directly acknowledged as a “material consideration” when the Tribunal determines a new market rent.
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Matthew Pennycook’s position is that the Tribunal “must look at the rent the property could command on the open market, rather than costs borne by the landlord.” He indicated that while the improved condition of the property (due to the EPC upgrade) could ultimately affect the open market rent, the Tribunal must not directly consider the landlord’s costs themselves.
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