Energy Performance Certificate: Why Buying New is Better

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%.