EPC ratings on rental properties – what’s changing?
Energy Performance regulations on rental properties have been fast-changing these last few years. Here’s your lowdown on the changes, when they come into effect, and what you can do to make sure that your rental property stays compliant with law.
What is an EPC?
EPC stands for “Energy Performance Certificate”. This certificate outlines the energy efficiency of a building using a scale from A (highest efficiency) to G (lowest efficiency), considering factors such as windows, insulation, heating, and renewable energy devices such as solar panels. The certificate also includes useful information such as the typical energy usage and costs, and recommendations on how to improve that particular property’s energy performance and save money. Certificates are created by an accredited assessor and are valid for 10 years. EPCs are a legal requirement for all properties being sold or let out in the UK.
Why is this happening?
The government has a long-term plan for the UK to reach “net zero” carbon emissions by 2050. It has set many different targets stretching out across lots of different sectors in the UK in order to reach this goal, and among them is improving the energy efficiency of our homes.
A bonus for renters is that they have – and will likely continue to see – an improvement in their living standards as a result of the changes, because homes that are cold and draughty due to old windows and poor heating will likely not meet the new government standards. Issues with damp can be improved by insulating a home and heating it properly, and the property’s utility costs will be lower as a result of the property retaining more warmth. So compelling landlords to meet certain standards is a good thing for all parties involved, as well as for the environment.
What changes have landlords seen so far?
The government first introduced the Minimum Energy Efficiency Standards (MEES) in 2018, stipulating that in order to start letting a property to a new tenant, landlords had to present a valid EPC with a minimum performance rating of “E”. In 2020, this requirement was extended to ALL rental properties in the UK, and not just for new tenancies.
What changes are still to come?
The government has said that the next step of their plan is to improve the EPC standards even further. The next goalpost date for landlords’ calendars is 2025 – at which point all newly let properties will need to have a minimum rating of “C”. These requirements will be applied in two steps; new tenancies from 2025, and then the rules will be extended to ALL tenancies from 2028.
What does this mean for me as a landlord?
Put simply, as of 2025 if your property does not have the minimum EPC rating of “C”, by law you cannot let it out to a new tenant. Those who attempt to let a property without meeting this requirement face a fine of up to £5,000 per property from their Local Authority.
Alongside this it’s worth considering that at the moment, when submitting a mortgage application for any of my landlord clients, lenders ask me for evidence of the EPC. Lenders refuse to lend on any property that doesn’t meet the current EPC minimum of “E” or doesn’t have a valid, unexpired certificate in place. So it’s fair to expect that lenders will increase their minimum requirement to “C” as and when the law changes.
What can I do if my property does not meet the EPC requirements?
It’s important to start thinking about the changes in law and preparing for them in advance. If you’re not sure, you can check your property’s EPC rating here.
If your EPC rating is too low, review your performance certificate to see what recommendations it has for your property. For example, it could be that you need to replace the windows, or insulate the roof in order to bring the property up to standard.
There are a few properties that can apply for temporary exemptions provided that they meet the right criteria. More information and guidance can be found here on the government’s website.
There is no government support available to help landlords finance bringing a property in line with the new EPC rules, meaning that landlords will need to pay the improvements themselves.
If it’s not possible to fund the work from your own sources, it is worth considering alternative routes. For many of my landlord clients, it has been possible for them to raise additional funds from their mortgage in order to complete the work necessary – and convenient for them to do so at the same time as renewing their mortgage deal.
Of course, there are lots of different methods of raising funds, and it’s a good idea to get some proper advice to help you determine which avenue is right for you.
If this has got you thinking, we’d love to hear from you. Get in touch and we’ll be help you understand what’s possible, or sign up to our monthly newsletter, to keep your finger on the pulse.
Helen Peel – 6th July 2022