Landlords in Doubt About Meeting New EPC Rating

Written By PropertyLoop
August 24, 2021

Research carried out by The Mortgage Works has shed light on rental property owner’s receptiveness of upcoming energy efficiency measures being introduced into the rental sector. With renters becoming increasingly conscious about how green their rental property is, alongside buy to let mortgage providers using enticing rates to incentivise landlords to get ahead of the curve and increase the energy efficiency of their property before the law demands it.

The suggested move by the UK government intends to make all rental properties achieve minimum of a “C” rating before being let out by 2025, with these measures being extended to encapsulate all running tenancies by the year 2028. Although this gives those that let out their rental properties four years in which to make their rental opportunities more environmentally friendly, the research has revealed that of 750 surveyed landlords, a shocking 35% stated they did not feel confident about being able to make the required improvements by the impending deadline.

As it currently stands a mere 2% of properties within England meet the two highest energy efficiency grades achieved through an Energy Performance Certificate of an “A” or “B”. Data gathered from the English Housing Survey states that around 85% of the nation’s rental properties are currently achieving an energy performance certificate rating of a “C” or a “D” grade, with the remaining 13% scoring the lower grades of “E”, ”F” ,or “G”.

Of the 750 rental property owners surveyed by The Mortgage Works over half shared that their largest concern about meeting the upcoming energy efficiency requirements relate to “property constraints”, with 44% revealing that they believe they would struggle to make their property more environmentally friends due to issues surrounding accessing the rental to conduct the appropriate workings without disrupting existing tenants.

As can be expected the findings also reported that landlords that hold a portfolio of 11 rental properties or more are expecting to face greater hardship in meeting the new increased standards for energy efficiency, with 66% saying property constraints would be a significant hindrance. However, of landlords that had a portfolio of ten properties, only 44% expressed these same concerns.

Similarly predictable after months of landlords facing record losses to help tenants address the mounting rent arrears, many rental property owners also sited sourcing the appropriate funds as an issue, with more than 25% raising this as a concern. Lending a figure to this the report found that approximately six in every ten landlords surveys stated that they would have to dedicate funding to ensure that their rental property met the new energy efficiency standards, whilst a distressing 14% revealed that they would be required to spend more than their annual rental income to make the appropriate changes to their property.

The UK government published a report in the early months of 2021 on the back of a consultation to improve the energy efficiency of privately rented homes across the nation. At the time rental properties comprised around 20% of the UK’s available housing, whilst also being the least environmentally friendly. Further to this the consultation shed light on the private rental sector’s environmental impact, stating that in 2018 alone the sector amassed over £6 billion in energy bill, producing 11 mega tonnes of carbon dioxide, alongside 3.2 million private rental properties being found to have achieved a below average energy performance certificate grade of “D”, barely meeting the established requirements.

The government has stated that it believes such changes to the private rental sector would allow for around 900,000 low income houses to be considered at least a ‘C’ grade on the EPC scale, saving tenants an average of £220 each year on their household utility bills. However, it has also been said that such changes would not only make rental properties more appealing to a generation of renters that has become increasingly environmentally conscious, but see greater returns from the value of the property both in rental charges and market price once it’s time to sell.

What Is an Energy Performance Certificate?

The EPC rating or energy performance certificate was introduced by the UK government in 2008 in an effort to make the private rental sector more accountable for the impact it has on the environment, leaving landlords to alter their properties in a bid to go green. Landlords are required to obtain a new energy performance certificate for their rental property every ten years, with landlords also being prevented from hosting their rental opportunity to new aspiring tenants unless it first meets the appropriate requirements. The Energy Performance Certificate is intended to give renters and landlords a comprehensive breakdown of the properties energy efficiency at a glance, giving the landlord arrears in which the property could be made more energy efficient, whilst providing prospective renters with an estimation of the property’s running costs.

In order to aid the simplicity of the document, making it accessible to first time renters and landlords alike, the energy efficiency of each rental property is graded on an alphabetised scale from A to E with the former being the most energy efficient. When the rental property is being evaluated for their energy performance certificate he assessor will consider anything that would suggest the property cant retain heat well, has poor insulation, the glazing of windows and if energy saving light bulbs are used throughout the rental, amongst other things. Once the evaluation of the rental property is complete a score will be awarded to the accommodation for each area of energy efficiency, these are then totalled with this numerical value determining the alphabetised grade the property will ultimately achieve on their energy performance certificate for an indication of its energy efficiency. To provide landlords with some context, if a rental property were to be found exceptionally energy efficiency and was to be awarded the high grade achievable on the EPC of an “A”, it would need to be given at least 92 ‘ standard assessment procedure’ points by the assessor.

In order to let out their property landlord will need to ensure that their accommodation achieves a minimum EPC rating of an “E” grade. This is referred to as the Minimum Energy Efficiency Standard and has been periodically increased to usher the rental sector into more environmentally friendly grounds. Although this encourages landlords to make serious progress in the name of efficiency the requirement to only obtain validation for each rental property every ten year raises some pressing concerns. For the landlords that have consistently met their EPC obligations a decade could see the measures implemented across the property and fail, potentially making what should have been small works to stay on top of an EPC grade, to chasing the minimum requirement to let.

Do Landlord’s Need an Energy Performance Certificate?

Simply put, landlords must have a valid Energy Performance certificate for every rental property that they let out, before it is presented to new tenants. This means that is the energy performance certificate for a property expires half way through a tenancy the landlord is by no means required to immediately undergo another inspection, but rather ensure that their property complies with the current regulation and once the tenancy ends have another inspection carried out. Further to this landlords are required to provide their new tenants with a valid energy performance certificate for the property within 28 days of the tenancy agreement being signed at no cost. If the landlord neglects to provide the occupants of their rental property with an energy performance certificate then not only could they face a fine of up to £5,000 but the landlord will also be prevented from serving their tenants with the section 21 notice, or no fault eviction stating that the landlord wishes to reclaim possession of the property come the close of the fixed term.

Similarly the landlord of the rental property can face severe penalties if it is found that they are letting out a rental opportunity that falls short of the current energy efficiency standards. In these instances it is likely that the local authority will handle the matters and serve the landlord with a notice of compliance, allowing them to carry out an investigation into the true energy efficiency of the rental and any recent changes that have been made to the property in an effort to make it increasingly environmentally friendly. If the local council are unsatisfied with the results of the inspection then the owner of the rental property could incur fines of up to £5,000 for each violation of the regulations found.

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