Don’t get caught short by the EPC – Landlords will soon have to meet these energy requirements!
EPCs – the looming concern for all Landlords
The UK is home to nearly 2.6 million Landlords, a growing figure that includes many of our clients. It’s easy to see why so many rent out properties – we can benefit from both rising capital values and rental incomes, while still having time to work other jobs. However, as we grow increasingly conscious of energy and the environment, so too our obligations are changing. Landlords must act soon to ensure that they don’t fall foul of expected new energy rules, in the form of EPC requirements.
What’s an EPC?
Since 2008, rental properties in England and Wales have had to receive an Energy Performance Certificate (“EPC”). This is a document providing information on the property’s energy efficiency and carbon dioxide emissions, with properties being rated from A to G. Further standards came into force in 2018 and 2020, meaning that properties being sold or let need a rating of at least an ‘E’.
95% of currently issued certificates are an E or above, so most Landlords meet the current requirements. However, as energy and environmental concerns increasingly dominate the headlines, much stricter requirements are on the way which Landlords cannot afford to ignore.
Changes on the horizon
In December 2020, the Government announced further changes, which are currently going through Parliament. These would take the minimum EPC rating to C for new tenancies by 2025, and existing tenancies by 2028.
For context, whilst 95% of certificates meet the current criteria of an E or better, only 40% are rated at C or better. Although a much higher proportion of rental properties will meet this requirement, large numbers of Landlords will be affected by this (perhaps 25% according to one survey).
Don’t get caught out!
Worryingly, many Landlords are unaware of these changes, and how they can make sure that they stay compliant. When 2025 comes, it’s likely that a large number will find themselves caught out. Millions of properties risk being declared ‘unrentable’: as a result, they could also be ‘unsellable’ or ‘unmortgageable’ as other parties are unwilling to take on the Landlord’s liability. Make sure that you’re not one of them!
If you fall foul of the new rules, your rental property will have to remain vacant until it meets the new standards and receives a new certificate, resulting in a loss of rental income. In addition, making improvements at the last minute could mean that you fail to secure the necessary funding, end up paying more than you want to, or find a labour bottleneck as other Landlords in the same boat compete for services.
How can I stay compliant?
The first thing to do is to check your existing EPC. This can be done easily using the link below. If you do need to improve your property’s energy efficiency rating, we recommend planning your response as soon as possible (as does the government!). As well as meeting your obligations and being more environmentally friendly, improved properties are likely to be more tempting for renters and buyers, as energy costs will be lower.
Find an energy certificate – GOV.UK.
If you have a rating of C or above, then congratulations – you are currently meeting the obligations! However, the EPC will expire 10 years after issue, so if you rent your property out after this period then you will need to obtain a new certificate.
A ‘High Cost Exemption’ does currently apply where improvement works are likely to cost over £3,500. It is estimated that the average cost of improvement will be higher than this, but this cap will subsequently be increased to £10,000 when the changes come into force. As such, you may be able to benefit from this exemption, but should not rely on it without researching the associated costs in advance; most properties will not be exempt.
Financial help may be available, including grants from the government, energy companies and local authorities; as governments and suppliers grow more and more carbon-conscious, we anticipate this growing in the future. However, this is not guaranteed, and may vary from area to area, so we do not recommend relying on external support.
Key areas
If you need to improve, you may be wondering where to start. Luckily, you don’t have to guess – the certificates (found on the above link) will provide specific advice on improving your property’s rating.
Some of the most common areas for improvement include:
- Insulation. This includes walls, floors and rooves, to prevent the escape of heat. You may also be able to insulate your hot water internally.
- Low energy lighting. This can be as simple as replacing your lightbulbs with low-energy alternatives!
- Heating controls. This can be expensive at first, but can save you money in the long run.
- Condensing boilers. This is another more expensive option relevant to many older properties.
- Double glazing. This will reduce your energy bills and make your home feel warmer.
- Solar panels. Although this has high initial costs, once installed your energy costs will be significantly reduced.
The government is also expected to introduce a ‘fabric first’ policy, which would force you to prioritise work that improves the fabric of the building over other alterations.
Once again, we stress: although these will help you meet your obligations, these measures can also save money in the long-term, as well as making your property more appealing to renters and buyers. Additionally, we are passionate about the environment, and know that many of our clients are as well; even if we weren’t obliged to take these measures, we are increasingly aware of the need to manage our energy usage and environmental impact.
How can Evolution help you?
Many of you will need cash in the near future to meet these requirements – some of you may not even have been aware of them before reading this note! At Evolution, we will support you at every step on your journey. In this instance, this could involve planning suitable and efficient ways to fund these costs, or perhaps a broader review of your financial situation. Our expert mortgage advisers can help you understand how this will impact on financing your property. As always, we’re happy to talk.