Property Regulation (Holiday Lettings)

Debate between Lord Stunell and Andrew Stephenson

Tuesday 14th June 2011 Westminster Hall

[The Parliamentary Under-Secretary of State for Communities and Local Government (Andrew Stunell)]

I thank my hon. Friend the Member for Pendle (Andrew Stephenson) for bringing this issue to the House and the measured way in which he has made his case. As he rightly says, the matter covers two completely separate issues. Indeed, just to complicate my response, it covers two completely different Departments. I am speaking as a Minister from the Department for Communities and Local Government, so I will certainly ensure that his words about the controlled waste consultation reach the ears of DEFRA Ministers. However, I am sure he will understand that I am not in a position to give him too much of a glimmer of light in respect of that, although I would be very happy to ensure that he gets a response from my colleagues in DEFRA on the matter.

What I can do—and hope I will do—is set out the position on energy performance certificates. I am not at all surprised that my hon. Friend has reported confusion and concern. I have to tell him that that has been followed up by a lot of correspondence. So I have confusion, concern and correspondence to sort out in my role as Minister. The first thing to say is that the matter is not a pretty picture as far as the Department’s previous performance is concerned. As he said, the EU directive came into force in 2007 and it clearly applies to all buildings. Just for reference, about 6.4 million energy performance certificates have been issued to homes in this country, so we are not dealing with a trivial number of homes.

When the directive was first published and approved at a European level by the United Kingdom among others, it provided that countries could if they chose to do so put in place a derogation for holiday lets of less than 4 months. The first mistake is that that opportunity to take a derogation was not pursued by the United Kingdom. If it had been taken, the derogation would be there now and today’s debate would not be needed. However, as I say, that derogation was not taken.

To compound matters, unfortunately I have to tell my hon. Friend that, a year after that—in 2008—the Department issued guidance that, contrary to the position outlined in legal parlance, claimed all holiday lets were exempt. That was the exact opposite of the legal position then in force. During 2009, it came to light in reviewing the application of the regulations that that double mistake had been made. That led to a consultation last year and, in February 2011, the Government announced their intention to apply the EU directive—if I may put it this way—in an underogated state, starting in June this year. There has been a very unsatisfactory record of missed opportunities and mistaken advice on the matter and, understandably, a large number of hon. Members have been approached by constituents who are confused but, more to the point, concerned by what has happened.

Let me first set out some of the facts of the situation and the reason why the Government are now saying what they are saying. EPCs are required on the sale, rent or construction of a building, including any property that is rented out as a holiday let for a combined period of more than four months in any 12-month period. My hon. Friend challenged the interpretation that a holiday let was a tenancy. It is important to make clear to the Chamber that there is a definition that covers this in the Housing Act 1988. Perhaps that is unfortunate, from the point of view of my hon. Friend. It states:

“A tenancy the purpose of which is to confer on the tenant the right to occupy the dwelling-house for a holiday.”

In terms of interpretation, that is a crucial point. There is no doubt at all that, from the UK legal point of view, such a holiday let is a tenancy and is therefore caught by the EU directive.

My hon. Friend asked how landlords and owners would know whether their property was to be let for four months, or six weeks if it was a bad season. The directive is clear. The point is whether the owner intends to rent out for more than four months—the intention is the question that has to be decided. I bring that to the Chamber simply to report the facts of the case. I do not seek to rebut every point made by my hon. Friend.

[Andrew Stephenson]

On the difficulty of enforcing the regulations, will the Minister clarify how intention can be proved? If every owner in the country decided that it was their intention to let their properties for only 130 days a year and they happened to let for longer, would they fall foul of the regulations? Their intention would have been to let the property for less than 140 days.

[Andrew Stunell]

My hon. Friend asks a worthwhile question. I imagine that it would be quite difficult to achieve a burden of proof to prosecute somebody for underestimating their intentions. I understand that the Department is not aware of any prosecutions under the regulations. Compliance is self-driven, rather than driven by prosecutions.

My hon. Friend raised the issue of cost. Undeniably, there is a cost to having an EPC—probably in the range of £50 to £80, depending on the provider. My hon. Friend quoted the figure of £10 million. That figure is for the total cost over a 30-year period, so we need to keep the scale of the problem in perspective. If the EPCs led to owners improving the energy performance of the cottages and homes that they let, they would receive a payback of £15 million in that 30-year period. There is, therefore, a net benefit in the provision of EPCs and the implementation of the energy-saving results that they will reveal—as there is for EPCs for the 6 million-plus that have been issued to ordinary homes. I want to ensure that we have it clearly on the record that there is a first cost, but that there is a potential for saving, too. As my hon. Friend recognised, that also makes a contribution to reducing the United Kingdom’s carbon output.

I would like to correct one of my hon. Friend’s facts, and to explore one of the propositions that he brought forward. He said that England and Wales would be the only countries enforcing this. They are already required in Scotland and Northern Ireland, so, depending on what we define as a nation, other places in the UK require EPCs. I asked my officials whether there was evidence of non-conformity by other European countries. I have been told that, having made inquiries to the European Commission, they are not aware of any country that is not implementing the EU directive in the manner that we now propose should be the case in England.

My hon. Friend produced some information about what France had done, and referred to the fact that a provider of holiday lets in his constituency had evidence from a much wider field around Europe. I hope that he will accept, as a glimmer of light, that the very first thing I shall do after the debate is seek whatever validation we can for those two pieces of evidence. We do not want providers in England to be at a disadvantage to other European countries simply because we have taken too robust a view of how the directive should be interpreted.

My hon. Friend referred to the Local Government Regulation document. I think that he has slightly over-egged his case. It has produced advice that says that an EPC is not required. The Department has attempted to get in touch with Local Government Regulation, which is a subset of the Local Government Association, to challenge or examine how it came to that view. Unfortunately, the member of its staff who prepared that advice is no longer with the organisation and we are having difficulty establishing how its view was arrived at. It may, quite reasonably, have been based on the advice, issued by the Department in 2008, to the effect that all holiday homes were exempt, but that was clearly not correct and clearly contradicted by the reality that no derogation was entered into by the UK in 2007.

My hon. Friend has raised these matters at the highest levels in government, and has made it clear that he believes that there are unnecessary burdens that could be lifted by the Government. As he acknowledged, the Government have a very good record on this. Indeed, an important part of what my Department attempts to do is to bust barriers. Barrier busting is something on which we wax eloquent. If my hon. Friend has, as he believes, found two barriers that we can bust, I give him an assurance that we will see what we can do to achieve that. However, the UK Government must correctly interpret and comply with EU legislation. It is also extremely important to reduce the carbon output of the UK. Half the carbon output in the UK comes from buildings, and a quarter comes from homes. Tackling this sector is important. EPCs are an important part of what we need to do to set the climate, atmosphere and culture that will lead owners and occupiers to use their buildings in an energy-efficient way. I hope that he will accept my assurance that we are listening to the points that he has made. However, we have a duty to ensure that we not only comply with European legislation, but live up to our target to be the greenest Government ever and ensure that all kinds of householders play a full and active part in helping us to do so.