Business Clinic: Energy compliance in FBT’s sublet cottages

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Here, Nick Curnock, Rural Associate with Carter Jonas, advises on what a new FBT tenant needs to know about making sublet cottages energy efficient and other landlord obligations. 

See also: Business Clinic: should we switch to a share farming agreement?

Q. I’m taking on a 10-year farm business tenancy (FBT) in September with two farm cottages as well as the main farmhouse. I will be living in the farmhouse but plan to sublet the cottages.

How will I know if the cottages are compliant with Minimum Energy Efficiency Standards (Mees) and who is responsible for ensuring compliance?

A: Let’s start with the responsibility considerations, as there are some actions you should take before the farm tenancy starts.

Ultimately, when you take on the tenancy you become the immediate landlord for any tenants you move into the cottages.

You will be obligated to ensure the property is compliant with Mees as well as Energy Performance Certificates (EPCs), and other regulatory requirements.

There are obvious duties of care, such as electrical safety tests, boiler servicing, gas safety certificates and smoke and carbon monoxide detectors.

However, there are also less obvious ones, for example you will also be responsible for maintaining furnishings such as fixings for cords to roller blinds, and health and safety issues if the accommodation is close to working farmyards.

Ensure that your landlord hands over the property in a compliant condition, or negotiate terms which reflect the improvements you will have to make, and the costs incurred in the process.

Looking specifically at Mees, these regulations came into force on 1 April 2018, setting a minimum energy efficiency level for domestic private rented properties.

They apply to all domestic private rented properties let on specific types of tenancy agreement, and the property is legally required to have an EPC rating of E or above, unless an exemption applies.

The agreements these apply to are assured shorthold tenancies (AST), a regulated tenancy under the Rent Act, and a domestic agricultural tenancy which includes an assured agricultural occupancy, or a protected occupancy.

If the cottages you are taking on are vacant and you are required to make significant improvements in order to make them Mees compliant, a high cost exemption is the main route to preventing such expenditure.

The regulation states that the prohibition on letting property below an EPC rating of E does not apply if the cost of making even the cheapest recommended improvement would exceed £3,500 including VAT. However, this may change.

A further consideration is the Renters Reform Bill, which is expected to become law later this year and will further tighten the legislative grip on your powers and obligations as the immediate landlord.

There is a window of opportunity to get houses in order before the bill is enacted, and we would recommend you do so.

One condition of your FBT is likely to be that you provide vacant possession of all property at the end of your 10-year FBT.

The bill abolishes no-fault (section 21) evictions so you may be faced with not being able to regain possession of a cottage you have let on an AST at the end of the FBT.

Those taking on property (either purchased or let property under an FBT) with sitting tenants should ask:

• Which properties have an EPC?
• When might one be required?
• Who is in the property?
• Might they be vacant soon?
• What tenancy is in place?
• If energy works are done now, can those works count towards a cost cap?

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