EPC C targets will have a huge effect on the supply of leasehold properties, says one industry body.
In an exclusive video interview with Property118, the chief communications officer of The Property Institute (TPI), Jaclyn Mangaroo, says leaseholders currently have no access to funding for energy efficiency improvements.
Jaclyn also points out the lack of regulation within the property management sector which the government has failed to address.
Jaclyn tells Property118 the government needs to change the rules otherwise leaseholders will simply not be able to meet EPC C targets and housing stock will be affected.
She says: “We are really concerned that if the government is pushing for EPC C standards, we need to unlock the ability to carry out these improvements in the first place.
“Leasehold stock currently makes up about 20% of housing, with around five million leasehold properties, of which 1.82 million are rented out in the private rented sector.
“By pushing these EPC C targets, leaseholders who are landlords renting out their flats in the private rented sector may struggle to meet the requirements if their lease prevents them from making necessary improvements. This will have a huge impact on the supply of rental homes in the private rented sector.”
The Property Institute is a leading professional body for the property management sector.
Many property managers oversee large and complex residential buildings and estates. TPI provides technical advice, legislative guidance, training and professional qualifications to support them in their roles.
Jaclyn explains how The Property Institute was formed.
She tells Property118: “We were formed fairly recently, about three years ago, through a merger between two previous organisations. The Association of Residential Managing Agents, (ARMA) was formed about 30 years ago, and the Institute of Residential Property Management, (IRPM) was formed 10 years after ARMA.
“The reason these organisations were created was that property management lacked regulation. Both ARMA and IRPM aimed to raise standards, provide guidance and offer qualifications for those entering the industry.
“With a strong desire to see regulation introduced and to further improve industry standards, ARMA and IRPM decided to merge, forming TPI.”
TPI now has 7,000 individual members working across the country in various tenures, including leasehold properties, student accommodation, and retirement properties.
On the company members’ side, they have 350 accredited property managers.
Ed Miliband has announced all rental properties will need to meet energy performance certificate (EPC) targets by 2030 and 2028 for new tenancies.
As reported in Property118, the way EPCs are measured could also see reform next year.
Jaclyn explains the changes in EPCs will have huge consequences for leasehold properties, as more than 1.82 million leasehold homes are rented out in the private rented sector.
Jaclyn says: “We welcome any measures that aim to decarbonise the housing stock. However, we have concerns when it comes to leasehold properties, as leasehold law prevents certain improvements from being made to a building.
“This restriction exists as a protection mechanism. A landlord, as the building owner and freeholder, has a duty to repair and maintain the building but can make improvements and pass the cost onto leaseholders through the service charge.
“What this means is that if a landlord wanted to make any energy-efficiency improvements, they would have to fund the entire cost themselves.
“However, building owners do not necessarily pay the energy bills for the whole building, as those costs are shared among leaseholders. If you are a leaseholder, you cannot make changes to the communal areas, walls or windows, which prevents you from making improvements.”
Jaclyn points out that a lot of older buildings will struggle to meet EPC C targets and upgrading them isn’t going to be a quick fix.
She explains: “I think we’ve seen through the building safety crisis and the ongoing remediation programme, nearly eight years after Grenfell Tower, how long it’s taking and how much it’s costing to replace cladding on buildings.
“If you compare that with adding insulation and improving the fabric of the building, it gives you an idea of how long these upgrades are going to take.
“Our members manage around 60,000 blocks, and it’s going to take several years to bring those buildings up to EPC C standards, especially since many of them are in older buildings.”
Jaclyn adds there’s no funding for leaseholders to access grants to upgrade a property EPC rating.
She explains: “For new builds, it’s not an issue, but for legacy stock, the improvement clause isn’t available, making upgrades much more difficult.
“There’s no funding mechanism for leaseholders to access grants, and while they can make small changes within the property, they occupy to try to bring it up to EPC C, they can only do so much without the permission of the building owner or the other leaseholders.
“Listed buildings also face much stricter planning regulations, and many of these buildings have been converted into flats under the leasehold tenure. This begs the question of what to do with these buildings.”
Jaclyn says the institute would like the government to introduce funding for energy-efficiency improvements for leaseholders.
She explains: “I think it’s difficult as the government doesn’t have a lot of funds at the moment. While the government are focused on remediating buildings and replacing cladding, wouldn’t it also be a good idea to improve the insulation of the building at the same time, particularly if contractors are already on site who could carry out the work?
“The second thing we would like the government to do is to consider making home grants for energy efficiency accessible to leaseholders, whether the freeholders who own the building, which in some cases are the residents, or individual leaseholders themselves. At the moment, they can’t access funding.”
Jaclyn adds: “The third thing is to apply terms into leases that bypass the improvement clause. This would adopt a more commonhold system, where if the majority of leaseholders in a block want to improve efficiency, such as through triple glazing or installing solar panels on the roof, they can come together and decide to do this.
“They would need to be able to access funding, and this more democratic process would unlock the ability to begin those conversations.
“Leaseholders are already paying for energy costs in their own flats, as well as a share of the energy costs for the entire building through service charges. If we can unlock that, it could help bring those costs down.”
TPI has set out a manifesto outlining what they believe is needed to improve the leasehold system.
Alongside calls for funding to support energy-efficiency improvements, a key focus of their manifesto is stronger regulation in the property management sector.
Jaclyn explains: “The Labour government has talked about ending leasehold in this Parliament, which I think is fine, as there are issues with leasehold, as there are with any tenure.
“I think the reforms they are talking about, particularly improving transparency and standardising how service charges are laid out, are welcome. But the one thing that is missing is the regulation of the sector.
“Regulation is a top priority in our manifesto, and we need to stamp out anybody in this market that’s incompetent or behaving unethically.
“At the moment, you could have anyone set up as a property manager and take over the health and safety and wellbeing of residents in these buildings. You don’t need any experience or to pass any exams to be a property manager, and that’s concerning. You wouldn’t go to a doctor who’s unqualified.”
Jaclyn explains the lack of regulation in the sector affects residents, and introducing qualifications would make sure people are properly trained to manage buildings and service charges.
She says: “I think it’s important for residents to have confidence that the people responsible for maintaining the building and collecting the service charges are competent and qualified. As much as regulation can be seen as a bad thing, proportionate regulation in this sector is increasingly necessary.
“We need to get recognised as a proper profession and introduce some form of minimum qualification standard and code of practice to operate in the sector.
Jaclyn explains all of TPI members are voluntary members, and she adds: “Our members recognise the importance of being properly qualified, and we offer OFQUAL accredited qualifications, training, and guidance to support them. They understand the need to stay on top of all legislation and ensure they remain compliant. However, anyone outside of our membership is essentially free to operate however they wish, with no oversight.”
The manifesto also calls for more transparency for leaseholders, especially when it comes to clearer information for prospective buyers about alternative ownership models and tenures.
Jaclyn points out that some first-time buyers may not realise they’ve ended up with a leasehold property.
She explains: “A lot of people don’t always know what they’re getting into when buying a leasehold flat. There needs to be a process from the very beginning, so buyers understand their rights and responsibilities as leaseholders.”
“I know it’s super exciting to buy your first flat, but it’s really important to read the lease and understand your obligations.”
Jaclyn adds that giving leaseholders more transparency throughout their time owning the property will help them know what to expect before they buy and make it easier to challenge any unexpected costs.
TPI manifesto also calls on the government to speed up the timeline for building safety.
Jaclyn tells Property118: “Remediation is happening far too slowly, and unsafe cladding is still on many buildings.
“About 1,000 buildings have been worked on, but another 3,000 still have cladding that hasn’t been removed.”
She adds: “We’re still putting pressure on the government to get these buildings fixed and there’s the building safety acceleration remediation plan that the Building Safety Minister Alex Norris published last year so we are keen on what that is going to look like.
“The government have committed to make all buildings safe and be fully remediated by 2029. I can’t see that happening personally as progress is very slow unless they do something drastic.
“In the meantime, it leaves leaseholders unable to remortgage, unable to sell, paying a high premium and ultimately they don’t feel safe in their homes.”
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