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What is an Energy Performance Certificate (EPC)?
Looking very much like the tiered, coloured sticker on new appliances, an EPC informs you how energy efficient a building is and gives it a rating from A (very efficient) to G (inefficient). Ultimately, an EPC will let the person using the building (usually the tenant) know how costly it will be to heat and light, and what its carbon dioxide emissions are likely to be. To measure the EPC rating of a property, qualified assessors look at a variety of factors including:
The age and dimensions of the property
The materials from which it is built
Whether it has single or double-glazed windows
The type of heating and hot water systems and their controls
The type of lighting
The energy assessor inputs this information into a software programme that produces both the EPC and a list of recommendations for improving the energy efficiency of the property. That EPC is then valid for ten years before the property needs to be reassessed. With the introduction of EPC’s the government subsequently hoped that landlords made the improvements recommended on their EPC. However, until more recently, a landlord could not be compelled to implement such energy saving changes.
What are the legislative changes?
On 1st April 2018, the government made it a legal requirement for residential landlords to ensure their EPCs for their rented properties to have a minimum rating of E. This Minimum Energy Efficiency Standard (MEES) was only applicable, however, to current tenancies and thus existing tenants could still legally be living in F and G rated properties.
From 1st April 2020, the MEES regulation extended further and now requires all new and current tenancies to have an energy rating of at least E. This means in practice that properties part of ongoing lettings that are rated F or G must be brought up to the standard of E for their tenants to continue living there.
What is expected of the landlord?
An EPC is needed whenever a property is built, sold, or rented. All landlords must order an Energy Performance Certificate for potential buyers or tenants before marketing their properties to sell or let. If a landlord wants to rent or is currently renting property rated F or G then they are required to carry out energy improvements up to the cost of £3500 + VAT, before they can register for one of the government exemptions.
What are the exemptions?
An exemption can be made in a range of circumstances. This is usually after a landlord has tried to improve the properties energy rating within the £3500 +VAT limit and has failed to improve the rating to level E or better. If an exemption is approved by the relevant authority, then this exemption will last for five years before the landlord is once again required to make the changes.
Typical exemptions include:
‘High Cost’ Exemption: If the cost of making even the cheapest recommended improvements exceeds £3500 + VAT, then no improvements need to be carried out. To support the exemption, the landlord must provide quotations from three different suppliers.
‘All Improvements Made’ Exemption: When a landlord makes all the recommended improvements within the £3500 + VAT limit, and the property is still below the EPC rating of E, an exemption can be registered.
‘Wall insulation’ Exemption: Where a recommended wall insulation improvement is not suitable for the property in question. There must be written advice from an independent expert (usually an architect) stating this is the case.
‘Consent’ Exemption: Some energy improvements require consent from third parties such as local planning authority, mortgage lender, superior landlord etc. Where the landlord fails to gain such consents after reasonably trying, they are not expected to implement the changes.
‘Devaluation’ Exemption: In some situations it is possible that installing the energy recommendation measures would devalue the property. Where this happens, an exemption may apply. The landlord would need to obtain a report from an independent surveyor which shows the proposed measures would devalue the property by more than 5%.
Is it better to buy new build buy to lets?
With the governments clear drive in creating a more energy efficient Britain, landlords were one of the first affected. The MEES regulation now means that landlords could be required to fork out thousands of pounds in improvements to their older properties. This is a necessary, but expensive, evil as the country looks to reduce its carbon footprint.
Fortunately for landlords wanting to swerve these inevitable costs they can look to buy new build buy to lets. New developments generally have an EPC rating between A-C. In fact, recent research has suggested that 84.4% of newly built properties have an EPC rating of an A or B, compared with an incredibly small 2.2% of existing buildings.
Furthermore, research has shown that the cost of household bills in new builds has been reduced by approximately £490 a year, with owners of new-builds paying a yearly average of only £440. These figures are a stark contrast to those owners of older buildings, who have been shown to pay an average of just over £1,000.
At CityRise we specialise in new builds and always pick out developments that are built to fantastic specification with high EPC ratings. In our opinion it is important that landlords are not only environmentally conscious but also conscious of the bills incurred by their tenants. With gas and electricity prices ricing all the time, tenants are becoming more aware that rental costs must be taken in tandem with costs of bills. This means that a low EPC rating can act as a real deterrent to potential tenants.
Ultimately, we believe that happy tenants make happy landlords and new developments offer an alternative to the costly older building available on the market. If you would like to save money down the line and are interested in investing one of our brand new, high EPC rated properties then please get in touch today.
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