Attention Landlords! Changes to EPC ratings and how this will affect your mortgageability?
Elisha Farrell
Mortgage Underwriter @ Pepper Money ? Loans & Protection Specialist ? Quantitative & Risk Analysis ? Lending Procedures
If you’re the landlord of one of the cooler properties in England, be warned – you won’t be allowed to keep it that way.?
The regulations In England and Wales, new legislation established Minimum Energy Efficiency Requirements (MEES), required that private rented housing have a minimum EPC rating which now applies to all tenancies, not simply those starting up.
This below guide for landlords outlines the latest regulations and illustrates how you how can improve your EPC ratings, the benefits you can reap while doing so and the affects on?mortgageability.?The?government announced new requirements for minimum energy efficiency standards that will come into effect in 2025.
What is an EPC?certificate?
An EPC (Energy Performance Certificates) is a report that assesses the energy efficiency of properties and recommends specific ways in which the property can be improved. It gives would-be renters or potentially buyers an idea of how much energy bills will cost.
To obtain an EPC, your home must first be evaluated by an Energy Assessment Survey. Your Domestic Energy Assessor will examine the health of your structure’s energy efficiency and what level of efficiency may be achieved if improvements are made.
When your assessor comes, a few aspects they’ll consider are:
Your property’s EPC rating is based on:
When your assessor has completed a comprehensive examination, they will compile your EPC report and assign an energy performance grade of ‘A,’ ‘B,’ C,’ D,’or ‘E.’
The certificate will contain information about the property’s energy use, current energy efficiency EPC rating and what could be done to improve it.
There are some homes that still rank poorly, despite there being a number of competitive advantages to landlords shifting to a ‘green’ EPC model.
Why are landlords getting fined over their EPC?
From 1st April 2020, landlords who rent out a property with an EPC rating of F or G will?face a civil penalty of up to ￡5,000 for non-compliance with the government’s new Domestic Minimum Energy Efficiency Standard (MEES) regulations.
MEES regulations set a minimum energy efficiency level for domestic, private rented properties – if your property’s EPC rating is E or above, you’re compliant with the regulations and can relax temporarily – at least for now!
However, if your property has an EPC rating of F or G, you are breaking the law and could potentially be looking at a sizeable fine – which would vary, depending on the length of the breach of regulations.
It’s up to tenants to let the First-Tier Tribunal General Regulatory Chamber know if they feel their landlord is breaching the legislation and they can raise a case.
If your property does not have a valid Energy Performance Certificate, it may not be legally rented. You risk being fined up to ￡5,000 by your local authorities if you are discovered to have no EPC. The penalty for failing to obtain an EPC rating of ‘C’ or higher in 2025 will be raised from ￡20,000 to ￡30,000.
If a landlord’s rental property is found to be in one of the worst two categories F or G under EPC, they must register for an exemption. All landlord exemptions sought by landlords in order to improve their EPC on their rental property from a F or G rating must be registered on the PRS exemption register.
Before you submit an exemption application, make sure you have enough evidence to support your claim. Do not submit a fraudulent exemption claim since there are heavy penalties for doing so.
If a landlord’s property does not meet the EPC standard, they will only be responsible for spending up to ￡3500 to improve their rental property. This is called the “Cost Gap” in Government guidance, and landlords who spend that amount can register their property as “all improvements made” on the PRS exemption register.
Can I access a copy of my EPC online?
A copy of your property’s EPC is accessible online, if one already exists. If your property is in England or Wales, enter your postcode into the Landmark Register. In Scotland, check the Scottish EPC Register.
How long does my property’s EPC rating last?
Once issued, your EPC is valid for 10 years – if your EPC is older than 10 years, you will need to get a new one issued before you can sell or rent your house.
Properties are rated F to G on the EPC register?
According to the Residential Landlords Association (RLA) in 2019, about 290,000 rental properties had an F or G rating that needed to be improved in line with the new regulations, before they could be put on the market for new tenancies.
How does this affect me?
Most landlords won’t be affected by the new regulations as their properties already meet the requirements. However, there’s still a small category of rental homes that don’t. Older and period properties, for example, just weren’t designed with energy efficiency in mind, so it’ll take a lot of work to make the necessary changes to get them up to scratch.
What are the benefits to landlords of renting out an energy-efficient property?
Even if you’re not living in the property, you can benefit financially from keeping it as energy efficient as possible.?Here are three great reasons to stop those draughts:
1.?If you look after the energy efficiency of your property, it can increase the value and desirability of it, which means you’re more likely to have it occupied thus fewer void periods
2.?Warmer homes and cheaper energy bills mean happier tenants. Because they’re not forking out on huge monthly bills, they have more disposable income – this also makes rent arrears less likely, saving you a headache.
3.?If you have energy efficiency measures in place, you’ll have lower maintenance bills and call-outs because you’ve reduced the likelihood of mould, damp, condensation and freezing pipes – all big hassles for landlords.
4. Lenders are increasingly looking to energy efficient properties to?lend to, therefore, they will be moving towards a greener type of lending in the forthcoming years
领英推荐
Five top tips to making your rental property more energy efficient
If you’ve checked your property’s EPC rating and it’s not at the required standard, you will need to act fast.
If you’re a forward-thinking landlord who wants to further improve your EPC rating to appeal to growing numbers of eco-conscious tenants, I have put together the five best ways to do it. Think about what’s most cost-effective – it might be that you can make a number of these changes at the same time.?
1. Upgrade to LED light bulbs
If your EPC rating is dwindling on the margins of E towards F, it might only take a simple switch from old halogen or incandescent light bulbs to LED light bulbs to lift your property up one or two ratings. Light-emitting diodes (LEDs) save you money on your electricity bill because they are much more energy-efficient and eco-friendly. Although they cost a little more to buy, they can last for 20-30 years! Make sure you replace all your bulbs this way.
2. Insulate your house
This is one of the most impactful changes you can make, and it’s not surprising because you lose so much heat through your roof (25%) and walls (35%). The remaining 40% is lost through doors, windows and the floor – we’ll get to windows next.?
We thoroughly recommend insulating your property, as it’s likely to cost you less than alternative improvements, and it won’t cause a huge upheaval to your tenants. Plus, it’ll get you out of the danger zone of E, F and G – fast. Hitting the magic measurement for increasing insulation in the loft with 270mm thick (at least) boards or wool, for example, will significantly reduce the amount of heat escaping through the roof.
Loft insulation is a fairly quick task that is easy for a moderately skilled DIYer to do and it’s a low-cost place to start in your energy efficiency journey.?
Installing cavity wall insulation can stop 35% of your property’s heat from escaping through the walls – average costs are ￡370 – ￡500 for a typical semi-detached property. Considering the huge impact it could have on your overall EPC rating, this one’s a no-brainer.
3. Invest in double or triple glazed windows
If you’ve tackled your insulation woes, next are your windows. Older windows could actually be responsible for up to 40% of the heat loss in your property, so if you’ve had the same windows for a good while, it’s a great idea to install high- performance glazing. This will make a massive difference to the energy efficiency of your property.
Not having double-glazed windows might be why some properties haven’t reached the minimum required EPC rating of E – and getting them installed could raise your score by a grade or two, at around a ￡2k-￡5k price tag estimated for a terraced house.
Triple glazing goes one step further. Although it’s an increasingly popular measure that will make sure your heat won’t make a great escape, you’ll be making minimal gains for the cost. It would be wiser to tick off all the other measures on the list before shelling out for triple-glazed windows.
4. Install a more efficient boiler
If you’re going to optimise for energy efficiency, heading to the source of the heat is a wise move. Your central heating system is the foundation of your property’s EPC rating and represents a significant chunk of energy costs at a whopping 55%.
If you’ve got an old boiler with an appliance rating of ‘G’, it’s no wonder your home is inefficient. Replace it with a new A-rated condensing boiler?that includes a programmer and thermostat and you could soon get your property out of the regulations danger zone. A new, A-rated boiler is likely to cost between ￡1k and ￡3k, but this will make your property significantly more energy efficient and attractive to new tenants, by savings on heating costs (based on a detached house).
5. Install a smart meter
Smart meters are a great way of letting your tenants see how much energy they’re using whilst encouraging them to tweak their behaviour to become less wasteful. When a person can see the exact cause and effect of their habits, and how that relates to the amount of disposable income they have at the end of the month, it’s remarkable how thrifty that person can become!
You may be able to get financial help for making energy-saving improvements to your property under the UK Government’s Affordable Warmth Initiative – if your tenants claim certain benefits, such as Child Tax Credit, Working Tax Credit and Universal Credit.
Minimum Energy Efficiency Standards (MEES)
The government has proposed that the Minimum Energy Efficiency Standards will change in 2025, which will then affect rental properties located in England and Wales.
The current MEES or minimum energy efficiency standards for rented properties are a minimum rating of E on their Energy Performance Certificate (EPC).
The government has announced that, after the consultation on December 30th, there will be changes made to the minimum energy efficiency standards for England and Wales only. All rental properties will need a EPC rating of ‘C’ or above by 2025 at the latest. The new regulations will start with newly rented properties first, followed by all other tenancies by 2028.?The regulations are designed to make homes more energy-efficient and to reduce carbon waste, all in an effort to meet the government’s net-zero requirements.
In the United Kingdom, houses are generally older than in other European countries, and home energy efficiency can be considerably improved.?These changes will upgrade the private sector homes EPC, helping to reduce energy bills and make tenants more comfortable as homes will be warmer.?
However, the 19 changes will be phased in over a ten-year period, starting with new tenancies in 2025 and then all tenancies after 2028, which will apply to both domestic and private rental housing on a lease of any length.
What are the effects of these new EPC rules on landlords?
If a property is required to go from an E rating to a C, landlords may be charged thousands. Landlords will be expected to pay for either insulating their homes or utilizing other “fabric first” features that can assist with heat retention and illumination.
If you want to advertise your property for rental after 2025, you’ll need to give updated and compliant EPCs to lettings agents. If your property doesn’t have a rating of C or above, though, you won’t be allowed to advertise it at all.?
You could be fined up to ￡30,000 if you do not comply.
These new rules will affect?mortgageability in larger degrees, as already lenders are offering?incentive rates to landlords who have properties at A C EPC rating.
Financial assistance to pay for the new EPC regulations
Some landlord associations and regulatory bodies are asking for money to help landlords improve their rental properties’ energy sources. The Association of Residential Letting Agents (ARLA) thinks that the new standards might be too difficult or impossible for lots of landlords to reach.
Landlords and their letting agents have been impacted by tax changes, and some are struggling to find support for tenants who have Covid-19 related arrears. This financial hardship on landlords means there will be less rental properties available to tenants who need it.
With the consultation now complete and changes to the minimum EPC rating confirmed, landlords can begin working to improve their rental properties’ EPC rating.
You can stay updated with current EPC guidelines on the government website. If you need more information on how this will affect your mortgageability, please get in touch via email [email protected] or phone: 0203 092 4073.