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Legislation Changes for Energy Performance Certificates in Rental Properties

Posted by Deborah on 21/09/2022
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What is an Energy Performance Certificate (EPC)?

This is a certificate which shows the energy efficiency of a UK property. Currently, a new certificate only needs to be commissioned should the property be marketed for sale, or if the landlord wishes to let to a new tenant.  EPC assessment certificates last for 10 years.

Landlords and EPC legal requirements

Since October 2015, a landlord is required to provide all applicants for a tenancy, with a copy of the front page of the EPC (for all properties which require one). A copy of that page should also be provided to the successful tenant on signing the tenancy agreement.

Since April 2018, all new tenancies must have an EPC of E or above (unless the property is exempt). This was extended to all existing tenancies in April 2020.

Future EPC changes

There is a current plan to move the EPC band requirement in rental properties from E to C by 2025 for new tenancies. It will then be rolled out to 2028 for existing tenancies. This hasn’t yet been confirmed by the government and with a new Prime Minister, this may be kicked into the long grass. However, even if delayed, its unlikely it will be shelved altogether.

How will this affect you?

If you’re considering purchasing a buy to let property, the EPC is something to really pay attention to.  There’s a lot of information in these reports, with suggestions of how certain investments will impact on the energy efficiency of the property.  If the property is a C or above, there’s little to be concerned about.  You are unlikely to have any outlay in the foreseeable future regarding the energy efficiency of your property.  In addition, due to the cost-of-living crisis, everyone is looking for savings in the running costs of their home. This means that tenants will also be more interested in energy efficient properties to rent.  

If you’re an existing landlord, if your EPC rating is below a C and you haven’t invested in the energy efficiency of your rental property in a few years, now is the time to take stock. 

When considering works to improve the EPC of a property, you should consider those works recommended in a current EPC AND discuss your plans with a Domestic Energy Assessor (EPC provider).

What are your long term plans for your property? 

Firstly you need to think about your long-term plans for your property.  Do you intend to sell the property within the next 5-7 years? If the answer to this question is yes, then you might want to consider selling sooner rather than later.  

The closer to the legislation deadline you leave things, the more this may impact on the value of your property.  Investors may only be interested in your property, if they can buy it at a discount. They will be looking to cover at least the cost of the work required.  In addition, mortgage lenders may not lend on properties with poor EPC ratings. 

Whilst investors aren’t the only house buyers around, it will reduce the number of people who might be interested in your property. This will give you less bargaining power.

Are you are considering selling your rental property because of these changes? Further considerations:

  • What do you plan to do with your money in order to generate the same return you were receiving from your rental property?
  • Is your capital gains tax going to be more than it would cost you to upgrade your property?

So as you can see, there are many factors to your decisions making process. All the pro’s and con’s for your specific circumstances need to be carefully weighed up.

Are you planning to keep the property?

If your property is part of your pension, or long term investment strategy, then the sooner you start planning, the easier it will be to spread the work and thus the costs over a few years.

Energy Efficiency planning – where to start

Your first step should be to dust off your EPC certificate.  If you’ve not carried out any work on the property since the last assessment, its most likely that it will still be current and relevant.  But if say for example you’ve installed loft insulation, or double-glazed windows, then consider having another assessment carried out.  Most assessors will provide you with a draft report if you ask. This will give you a line in the sand, from which you’ll be able to start working on your energy efficiency strategy. 

One point our assessor recently raised was relating to heating. If possible, never go for LPG, either bottled or tank as they score lowly, and never switch from storage heaters to flat rate electric heaters of any type.

What an EPC report can tell you

Most people don’t give their EPC report a second glance.  Property owners who are selling, or renting out their property, only get the assessments carried out because they know they have to.  They then file them away and promptly forget about them. However, they’re a font of knowledge.  Here’s what your can find out from your EPC report:

Current EPC Rating

The first section of your property’s EPC shows its current EPC rating plus an the size of the property in square meters. It also shows the address, expiry date and certificate number (these have been blanked out on this example)

Current and potential energy costs

Here’s an example, showing a property that’s currently rated 73, which gives it a comfortable C rating.  However, you’ll also see that there’s still potential to achieve a B rating.

Recommendations

This is the interesting bit, where you can really drill down to see what energy efficiency steps you can take, what they will cost and approximately what level this will move your property EPC rating to.  The low hanging fruit (low cost/high impact) are normally the ones to focus on first. This C rated property can’t be improve on by much, so the investments may not be necessary at this time.

Here’s an example from another property (and a different assessors report). Here its suggesting loft, cavity wall and floor insulation as a combination to achieve a C rating.  There are yet further suggestions to help you achieve a B rating should you wish. 

Please also note that some of the assessors’ observations are based on assumptions.  Therefore, its worth advising them of any ‘hidden’ energy efficiencies that they might not pick up on. Be prepared to provide proof with certificates or invoices.

Where you can get help – and possibly grants

EPC Assessor

Another useful section on your EPC certificate is towards the end of the report.  Here you’ll find your EPC assessors name and contact details.  This might be helpful, if you wish to discuss energy saving ideas in more detail.  Your assessor may even have good contacts with local trades or government grant schemes. 

If you’re unable to use your original energy assessor, please contact us and we’ll put you in touch with ours. 

The government website

There’s a whole host of information on the government website about what grants you may be entitled to. Here’s a couple of links to get you started:

Boiler upgrade schemes

Green Home Grants

Please be mindful however, that since the government has set up these schemes, a lot of ‘cowboys’ have appeared in the market. So please be vigilant. As a minimum, check for their accreditations. Also, check they’re a registered company and ask for examples of jobs they’ve carried out locally along with testimonials.

One last point about investing in the energy efficiency of your property

There’s no getting away from the fact that this legislation change will mean additional costs for a lot of property investors over the next 3-6 years. 

However, not only will any changes you make benefit your tenants quality of life but you as a landlord and investor will benefit too, albeit in the longer term. Higher energy efficient properties are going to be the most desirable properties of the future. There will most certainly be a value to that desirability.

Many listed buildings are exempt from EPC requirements, but the majority of them Do require an EPC. The only way to find out for sure is to commission an EPC and discuss the report with the listed buildings officer in your planning department.

Not all properties can achieve an E (or C ) rating on an EPC and for those few properties where the reason for not having an EPC is genuine, it is possible to register on the EPC Exceptions Register.

I hope this helps to remove some of the myth and worry around the changes to the EPC rating of rental properties. However, please call or email us at CAM Properties if you have any questions. 

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