Why landlords should prepare for more EPC rating improvements on properties

With less than a month to meet new Minimum Energy Efficiency Standards, landlords are likely to hear a lot more from the Government on EPC ratings during 2018.

EPC Energy Efficient Home

Landlords have until April 1st to make the necessary changes to ensure that their properties meet the new Minimum Energy Efficiency Standards, or face being unable to let them out under new tenancies, without an appropriate exemption.

Under the Government’s new rules, a rental property must meet a minimum Energy Performance Certificate (EPC) rating of E. The regulations apply to both residential and commercial property. For commercial properties, it is advisable to choose a company that specialises in producing commercial EPC certificates.

This rule will extend to all rental properties, irrespective of the tenancy situation, by April 1st, 2020.

But whilst there is a clear and present call to action for landlords now, there is a longer-term reason to act – and the sooner property owners do so, the more money they might save.

The impetus for a more significant review of a property’s energy efficiency  is derived from the Government’s ‘Clean Growth Strategy’, which was announced in October 2017. The report suggests we are going to hear a lot more about fresh plans on EPC during 2018.

Under long-term plans, the Government wants to see as many UK homes as possible achieve an EPC rating of C by 2035, with many homes in the private rental sector needing to reach that mark by 2030 “where practical, cost-effective and affordable.”

Whilst the present round of changes is mandatory, the Clean Growth Strategy report does not define how its ambitions will be implemented, but the message from the report is clear to landlords: there is no room for energy efficiency complacency.

The report states:

“We want to further reduce emissions from homes while ensuring that everyone has a home that is comfortable, heathy and affordable to run.

“For privately rented homes, we have legislated so that from April 2018, landlords of the worst performing properties will need to improve those properties to a minimum of EPC Band E before they can be let, lowering bills for some of the most vulnerable private tenants while ensuring costs of improvements are reasonable and affordable. We will consult shortly on steps to make these regulations more effective.”

Whilst adapting homes to be more energy efficient comes at a cost, the report also outlines the benefits of doing so:

“Almost 79 per cent of homes in England in 2015 had an Energy Performance Certificate (EPC) rating of Band D or better compared to 39 per cent in 2005.

“Upgrading energy efficiency from an EPC Band E to an EPC Band D reduces energy costs by £380 per year on average. For example, the annual running cost of a Band C rated home are £270 lower than the average Band D rated home and £650 less than the average Band E rated home.”

The private rental sector is very much in the Government’s sights on the issue of energy efficiency, and we can expect to hear a lot more on its longer-term plans to move more homes into the EPC Band C over the coming months.

“The Government will look at a long term trajectory for energy performance standards across the private rented sector, with the aim of as many private rented homes as possible being upgraded to EPC Band C by 2030, where practical, cost-effective and affordable. We will consider options with a view to consulting in 2018,” the report states.

Dave Princep, the Residential Landlord Association’s health and safety consultant, recently wrote:

“The recently published Government’s Clean Growth Strategy indicates that they will be shortly looking at increasing the energy efficiency standards that will apply to the domestic PRS – probably incrementally increasing the minimum EPC band at which premises may be let over the coming years.

“Against this background it is recommended that landlords whose premises are below a band C to consider undertaking all cost-effective energy improvements whenever undertaking major refurbishment or significant works at their properties.”