Rising energy bills and climate change. Both are hot topics for 2022, but they’ve been firmly on the Government’s radar since at least 2007, when Energy Performance Certificates (EPCs) were first introduced.
EPCs inform prospective buyers or tenants about the energy efficiency of a building and can be used to estimate potential utility costs. The Minimum Energy Efficiency Standards (MEES) set the bar for energy efficiency in all private rented properties in England and Wales, with tougher rules due to roll out in 2025.
What Are the Latest Rules?
At present, all landlords must ensure that their rental properties have an EPC rating of E or above. This means that properties must score over 39 points in an EPC survey conducted by a qualified EPC assessor. EPC assessments look at a number of factors including how much energy is consumed per square metre and the level of carbon dioxide emissions (in tonnes per year).
From 2025, the minimum EPC band will be C for all new tenancies, while existing tenancies will need to comply from 2028.
Is It a Legal Requirement to Have an EPC When Renting?
Since 1st October 2008, it has been a legal requirement to obtain an EPC whenever you sell, let or modify (build) a property.
There are three kinds of EPC available:
- The Domestic EPC for domestic properties, which includes an overall energy rating, an environmental impact rating and an indication of potential ratings.
- The Commercial EPC for commercial properties, which includes the same information as a Domestic EPC and more in-depth details.
- The Public Display Energy Certificate (DEC), which all public buildings are required to display in an accessible place and detail the building’s actual energy usage.
How Often Does an EPC Rating Need to Be Done on a Rented Property?
Once issued to a property, an EPC is valid for 10 years and you can use the same EPC for multiple tenancies in your rental property.
Which Properties Are Exempt?
The Government recognises that there are certain situations where it’s not practical to make the property upgrades for energy efficiency. In these situations, you can apply for an exemption from the Band E requirement.
Currently the exemptions include:
- High Cost Exemption: If you’re not able to make any improvement to your property because the cost to install the cheapest recommended measure would be more than £3,500 (including VAT).
- Wall Insulation Exemption: Where an expert provides written advice that installation of insulation would negatively impact the fabric or structure of the property (or the building that it’s part of), and this is the only measure you can implement.
- Third Party Consent Exemption: If you need to seek consent from a third party such as a tenant, superior landlord, mortgagee, freeholder or the planning department, and either consent cannot be obtained, or you cannot reasonably comply with any conditions imposed.
- Property Devaluation Exemption: Where evidence is provided by a chartered surveyor registered with the Royal Institution of Chartered Surveyors (RICS) that installation of the energy efficiency measures would devalue the property by more than 5%.
- Temporary Exemption for New Landlords: If you have only recently become a landlord, you can apply for a temporary exemption for six months, provided certain conditions are met.
With the exception of the Temporary Exemption for New Landlords, the exemptions apply for five years. After expiration, you will be required to reasonably try to improve the property’s EPC rating to E or reapply for a further exemption.
How Can Landlords Improve Their EPC Rating from E to C?
Updating parts of your home to improve energy efficiency from an E to a C rating can help to reduce utility bills in the long run. In addition, making your property greener can increase its value. In 2021, Halifax compiled survey data which noted that homes with the highest energy ratings are worth up to £40,000 more on average than lower rated homes.
To make improvements to your property, it’s worth taking a look at the recommendations on your previous EPC as a starting point. Improvement measures to reduce your property’s energy usage can include installing insulation, updating your boiler, investing in renewable energy, or switching to LED light bulbs.
Landlords are obliged to invest up to £3,500 on upgrades to their properties to bolster their energy efficiency. When the regulations are tightened in 2025, the cap will be raised to £10,000. Starting the process to upgrade your property’s energy efficiency now may help to spread the cost, enable you to seek additional grant funding, and beat the inevitable rush.
How Much Will an EPC Cost in 2025?
The cost of an EPC is determined by a number of factors, including the size of the property, its location and the type of building. Today, an EPC can cost between £35-£120.
Since the EPC regulations rolled out in 2007, the cost to obtain an EPC has not varied widely. So, while there are no guarantees, it’s unlikely the cost of an EPC will rise significantly by 2025.
The focus on reducing climate change and meeting environmental targets will only continue to grow, and with it, minimum EPC targets will continue to get tougher. Landlords will find it beneficial to revisit their existing EPCs or obtain a new one if it’s due, and work through the recommendations now to be ready for 2025.