With homes across the UK contributing to about a fifth of all carbon emissions from the country, the Government have proposed that all rental properties will need an EPC rating of at least ‘C’ by the end of 2025, as part of their journey to hitting their carbon neutrality goals. This deadline may not feel that far away, but given how fast the last two years have gone (let’s blame the pandemic on that one!), we are recommending affected landlords start making plans. Almost 60% of homes in the UK have a D rating or lower, which means this change could impact the majority …

We had a chat with one of our lettings experts at Hancock & Partners, Simone Proctor, to find out more, plus what the benefits to being greener are for landlords…

What does EPC stand for and how does it work?

An ‘EPC’ means ‘energy performance certificate,’ and is used to measure the energy efficiency of a property on a scale of A-G. Once obtained it is valid for ten years, but it is a legal requirement for a landlord to acquire one before advertising and letting their properties to tenants.

Homes which are the most energy efficient are in Band A, meaning they are more sustainable, produce lower energy bills and have less impact on the environment. Properties in band G are considered the worst in terms of efficiency as they are more costly to run. Currently, all buy-to-let properties need to meet an EPC rating of at least E, otherwise landlords risk hefty fines.

What EPC changes have the Government proposed?

There are currently two deadline dates being suggested… From 31st December 2025 all new tenancies much have an EPC of at least Band C, and then it will apply to existing tenancies from 31st December 2028.

Do landlords need to act now?

Recent research by UK Financial technology company, Landbay, found that 68% of UK landlords surveyed own properties rated D or lower, with 80% already planning changes to bring their ratings up to at least a C. They also noted that landlords with more than ten properties are taking the changes seriously the most. Many are starting the process now to ensure they’re a step ahead and not in a last minute panic. Starting early will also help spread the cost of improvements over a few years, plus there are actually some financial benefits to being greener.

What are the financial benefits for landlords?

With rising energy bills and general cost of living on the increase, tenants are looking for apartments and houses which are more sustainable to help keep their costs down. So the sooner landlords can improve their ratings to at least a C, the faster they will make their portfolios more desirable for tenants. This will not only help keep tenants longer and avoid any lengthy void periods, but being greener should improve rental returns and capital growth as well.

Another advantage for landlords is that they may be able to re-mortgage with green buy-to-let mortgages, which reward those with energy efficient properties.

What can landlords do to improve energy efficiency and how much will it cost?

When obtaining a new EPC, suggested improvements will be given, but areas usually include windows, floors, walls, and more energy-efficient boilers. The cost for landlords is currently capped at £3,500 inclusive of VAT, but it’s likely this will be raised under the new rules.

Are there any exemptions?

There are a few exemptions to meeting the new EPC regulations. For example, if the mortgage lender does not approve the upgrades required to improve the EPC, or if the building is listed and any changes would inappropriately altar the character or appearance. It’s also worth keeping a record of all expenses because if a landlord was to meet their spending cap, they may be able to get extenuating circumstances so that they don’t need to make any further changes.

Is this affecting what buy-to-let investors purchase?

A new trend has definitely emerged across the UK whereby more investors are focusing on buying properties in A-C bands in light of the upcoming EPC rules. New build homes in particular have become quite popular. However, we are still seeing landlords buy properties in lower bands because in some locations, the total expense of buying something in Band D for example and upgrading it to C, costs less than purchasing a property with an EPC of A-C.

Simone Proctor, Lettings Manager at Hancock & Partners

Find Out More

For more information about how the proposed EPC rules may affect your property portfolio, contact the lettings department at Hancock & Partners on 01243 531111 or e-mail: office@hancockpartners.co.uk.