The UK government has recently proposed new (EPC) energy performance certification regulations that would change the minimum energy efficiency standards for rentals, from an E to C. These changes are planned to take effect as early as 2025 and will impact all the domestic rentals in England and Wales.
Currently, the minimum energy efficiency standard is allowed for a rental is an E rating for your EPC, this will remain the case for active leases until 2028. However, in order to start a new lease after 2025, you will need to first re-establish your EPC as a C rating. The idea is to improve energy efficiency for all homes around the country, reducing carbon waste and progressing the government’s net-zero targets, as well as reducing the energy costs and overheads for renters.
These changes are being phased in, starting with new tenancies from 2025 and all tenancies will need to have a C grade by 2028. Penalties for non-compliance include fines of up to £30,000. What do landlords need to know about these new EPC regulatory changes?
Key Takeaways to the New Energy Performance Certificate (EPC) requirements:
The EPC rating was introduced for both England and Wales, in 2007. EPC stands for energy performance certification and it rates a property’s energy on a scale from A to G with A being the most efficient.
It is a landlord’s responsibility to ensure that the EPC rating is within the current UK guidelines and landlords need to update the EPC, at least once every 10 years. However, with these new regulations coming into effect it could be much sooner for your property.
A better EPC rating means a reduced carbon footprint and can make your property more attractive to renters and buyers as it means that their bills and utility costs are going to be lower. Ultimately, this means that they will have more money to pay towards their rent and other important living costs.
With approximately 57% of existing properties at the beginning of 2021 given a D rating or worse, it is obvious that a lot of people will be affected by this change.
Jumping from an E rating to a C rating could potentially cost landlords £1000s.
Landlords need to formulate a plan to increase their rating and spread out the cost of the necessary upgrades over the next few years to avoid a large single expense.
To improve an EPC rating a landlord can expect to spend money on a variety of things including insulation for the property, heating, lighting and windows. Another important thing to note is that the government is phasing out old school boilers in favour of more energy-efficient options and rentals need to upgrade to these new solutions, not only because they will increase your EPC rating and lower the energy bills of the household, but also because as these older boilers are phased out parts and repairs are going to become increasingly expensive.
Under the new EPC regulations. If you want to advertise a rental from 2025 onwards to new tenants, you will need to ensure that you are compliant with a C rating, or better. You will not be able to advertise your property if you do not have a rating.
We’ve mentioned already, there are a variety of ways in which you can improve your property’s EPC rating. But if you want to jump from an E up to a C, you will likely need to implement multiple changes.
Changes that you could look at implementing include:
Making some of the improvements suggested in this article could be immensely costly, especially, replacing a boiler, windows, or adding insulation to the property.
Some landlord associations and regulatory bodies are calling for financial support that will help landlords make improvements to their rental properties. The Association of Residential Letting Agents (ARLA) believes that the new rules and requirements may not be realistic. And that many landlords will simply not be able to afford to make the required changes to keep their properties in line with these new regulations.
Additionally, landlords and letting agents have been particularly hard hit over recent years by tax and regulatory changes as well, which has all been combined with the impact of rent arrears due to the COVID 19 pandemic. This being said, it is likely that there will be numerous financing options to get funding to improve your EPC regulation.
Find out more information about this by visiting the government website. And by viewing the EPC consultation document.
As you are making the required improvements to your property acquired energy improvements to your property, you will want to make sure that you carefully track all of the expenses associated with those improvements with software like Landlord Studio.
Landlord Studio allows you to easily keep up to date accurate digital records and carefully monitor and track all of your income and expenses. This will be absolutely vital, especially with making tax digital (MTD) coming into play in 2023.
Additionally, by using our smart dashboard and professional reporting features, you can quickly and easily identify areas of weakness within your buy to let property portfolio, allowing you to make informed tactical decisions to improve your portfolio’s overall profitability.
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