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Energy Efficiency EPC

The UK government has committed to a long term plan to improve the energy efficiency performance standards of homes across the UK. With this aim in mind, they introduced the Energy Performance Certificate in 2018 and have set ambitious targets for all private renting landlords to hit before 2030.

Landlords in England and Wales currently need to achieve an E grade in order to legally rent out their property. However, they will need to upgrade the EPC on their rental properties to a Band C or above by 2025 for new tenancies and all tenancies by 2030.

The intention is to help the UK achieve its ambitious carbon-neutral goals. For landlords, a better EPC rating means their properties will be more appealing to news renters as it will allow them to save money on energy bills helping reduce expensive vacancy periods.

You can download the Governments guidance on minimum energy standards here. 

When asked, Kate Faulkner, one of the UK’s leading property experts, said the following regarding the upcoming EPC regulation changes:

“ A major issue for all property owners, developers, and landlords which is going to impact them over the next few years is ensuring all properties do what’s required to meet the government’s ambitious net-zero targets. This includes boilers being phased out as the standard form of heating so landlords need to really think about how they renovate properties now and into the future and plan for the expenditure.

Even earlier than this, there is a current consultation on all rented properties meeting an EPC rating of ‘C’ to be let legally. Currently, it’s limited to ‘E’. This will be tough for landlords to achieve as the average in the UK is a ‘D’ rating. As of now, there is a limit of spend of £3,500 for landlords, but this is likely to rise in the near future.

All landlords need to be fully aware asap of their EPC rating and raise it to a C rating as quickly as possible and have a future plan for how to pay for a new heating system if holding during the lifetime of 20-25 years.”

Watch the full interview with Kate Faulkner where we discuss capital gains tax and EPC regulation changes and dig into some of the big questions landlords are asking today. Is now a good time to be investing in property? And how do you identify a property that you know will make a profit in the long run?

Below we outline 11 frequently asked questions that landlords have about the existing EPC regulations and the upcoming changes

What is the minimum EPC rating for rented property?

Landlords need to get a new Energy Performance Certificate (EPC) certificate every ten years. Each certificate has a grade from A to G, rating the building’s energy efficiency. The minimum efficiency standard is currently set at an E rating for all types of domestic and non-domestic property.

However, these regulations are changing and landlords need to make plans to upgrade their property to a C ratifying or above by 2025.

Do landlords have to provide an EPC?

On 1st April 2018, it became a legal requirement for residential landlords to ensure their Energy Performance Certificates (EPCs) have a minimum rating of E. Initially this regulation applied only to new tenancies, now though this law has been extended to all existing tenancies.

An EPC is needed whenever a property is built, sold or rented. All landlords must have an up to date Energy Performance Certificate for potential buyers or tenants before marketing their properties to sell or let.

EPC certificates currently last for ten years. However, with new regulations coming into effect in 2025 you may need to get a new Energy Performance Certificate for your property before that ten year period is up.

Can you rent a property with an EPC of E?

At this point in time, an EPC rating of an E or above is required in order for you to be able to legally market your property and let it out. In 2020 this rule was extended to existing tenancies as well. Meaning, even if you had long term tenants in your property and had no intention of marketing the property or replacing it then you would still need to get an EPC with a rating of at least an E by 1st April 2020.

Not having an EPC of E or above could result in you facing fines.

What EPC rating do you need to rent out a property?

Currently, landlords need a rating of E or above in order to legally rent out their property. This is changing and the UK government has committed to every rental being an EPC Band C by 2030.

Is it illegal to let a property without an EPC?

It is illegal to let out a property if it is in breach of the current EPC requirements. You must get an EPC – if your property does not reach the minimum requirement of an E rating then upgrades must be made to improve the rating( unless there is an applicable exemption).

Applicable exemptions include the following circumstances:

  • Such work would devalue the property by 5% or more
  • Recommended work has been carried out but the rating did not improve
  • The mortgage lender will not approve the recommended upgrades
  • The building is listed and the upgrades would ‘unacceptably alter’ the property’s character or appearance

If you believe your let falls into one of these categories, you can register it on the PRS Exemptions Register.

When is an Energy Performance Certificate required?

EPCs are required as follows for these dwellings:

  • Individual house/dwelling (e.g. a self-contained property with its own kitchen/bathroom facilities) – In this instance, one EPC is required for the dwelling.
  • Self-contained flats (e.g. each behind its own front door with its own kitchen/bathroom facilities) – One EPC per flat will be needed.
  • Bedsits or room lets where there is a shared kitchen, toilet and/or bathroom (e.g. a property where each room has its own tenancy agreement) – No EPC is required.
  • Shared flats/houses (e.g. a letting of a whole flat or house to students/young professionals etc. on a single tenancy agreement) – One EPC for the whole house is required.
  • Mixed self-contained and non-self-contained accommodation – One EPC for each self-contained flat/unit, but no EPC for the remainder of the property.
  • A room in a hall of residence or hostel – No EPC is required.

How do I get an Energy Performance Certificate?

You must find an accredited assessor to evaluate your property and produce the certificate.

Landlords with properties in England, Wales and Northern Ireland should look here: https://www.epcregister.com/searchAssessor.html

Those with properties in Scotland can find an assessor here: https://www.scottishepcregister.org.uk/assessorsearch

Who pays for EPC landlord or tenant?

It is the landlord’s responsibility to ensure their property EPC rating is up to scratch. If improvements need to be made to the property the landlord will need to organise and pay for these improvements.

What does an EPC contain?

An EPC includes information about a property’s energy use and typical energy costs. It also contains recommendations about how to reduce energy usage and save money.

It assigns the property an energy efficiency rating from A (most efficient) to G (least efficient). An Energy Performance Certificate is valid for ten years. However, all new tenancies will need a rating of C or above after 2025 – meaning, even if you got your rating recently you may have to get a new EPC before the new regulations come into effect in order to continue legally renting out your property.

You can be fined if you don’t get an EPC when you need one.

What are the new EPC rules?

The new EPC regulations would mean that from 2028, every property including those with existing long-term tenants will need to have a certification rating of C or above. However, if you want to rent out your property to a new tenant you will need to get this EPC rating of C by 2025. The changes are to ensure homes are more energy-efficient and to reduce carbon waste, progressing towards the government’s net-zero targets.

Future minimum energy efficiency standards in the UK

  • Since 1 April 2020, landlords can no longer let or continue to let properties covered by the MEES Regulations if they have an EPC rating below E, unless they have a valid exemption in place.
  • From 2025, it is believed that the minimum requirement will be raised to C.

Related: What Do The Upcoming EPC Regulation Changes Mean For Landlords?

What are the penalties for non-compliance with EPC regulations?

If a local authority confirms that a property is (or has been) let in breach of the Regulations, they may serve a financial penalty up to 18 months after the breach and/or publish details of the breach for at least 12 months. Local authorities can decide on the level of the penalty, up to maximum limits set by the Regulations.

The maximum penalties amounts apply per property and per breach of the Regulations. They are:

  • up to £2,000 and/or publication penalty for renting out a non-compliant property for less than 3 months
  • up to £4,000 and/or publication penalty for renting out a non-compliant property for 3 months or more
  • up to £1,000 and/or publication for providing false or misleading information on the PRS Exemptions Register
  • up to £2,000 and/or publication for failure to comply with a compliance notice

The maximum amount you can be fined per property is £5,000 in total.

Find out more about the government’s guidance to landlords.

Final Words

The expenses related to improving your EPC rating could easily end up costing you thousands of pounds. Landlords need a plan if they want to ensure their property is deemed fit for renting by the government when the new EPC regulations are implemented. Not doing so could mean sizable fines.

With the majority of houses in the UK rated at a band D or below the likelihood is these changes will affect you. While currently energy efficiency improvement costs are capped at £3,500, it has already been proposed to increase this limit to £10,000. Meaning, you could be required to spend a full £10,000 before you are allowed to rent your property to new tenants after April of 2025.

There are various measures you can take to improve the EPC rating of your property from small things such as blocking drafts and insulating the boiler, to larger things such as upgrading the insulation in the walls, floors and ceilings.

Make a plan, and ensure you track all of the work done and related expenses accrued during the process of improving the property using a digital income and expense tracking system such as Landlord Studio.

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