In 2018, new legislation came into force for EPCs in the UK. It affects various sectors of the property ownership market and notably, landlords. According to Brabners: an estimated 20% of commercial properties are classified as F or G rated properties, and so this regulation may create a significant impact on commercial, as well as residential, renting.
A quick reminder – what is an EPC?
An Energy Performance Certificate provides an energy efficiency rating for a property. The ratings are from A, the most efficient to G, the least efficient. The certificate is valid for 10 years and it is a legal requirement for properties to let and for residential properties put up for sale.
Why the Change?
The UK Government has identified the built environment as being one of the biggest threats to being able to meet its commitment of 80% carbon reduction by 2050 as defined in the Climate Change Act of 2008. The change in MEES regulations is aimed at improving energy efficiency in older buildings and ensuring compliance in newer and new buildings.
What are the changes?
From April 2018, it is a legal requirement for residential properties that are let to have an EPC stating a minimum rating of E. The legislation comes into force in April 2018 for new lettings and tenancy renewals and in April 2020 for existing tenancies. For legal purposes, this means all tenancies let under Rent Act tenancies, Assured Tenancies, and Assured Shorthold Tenancies. Landlords who fall short and fail to bring the property up to the E rating can face fines up to £4,000, but It is a simple process to obtain an EPC from a reputable company to ensure compliance. There are many clauses and exemptions and it is important that every landlord understands the new EPC regulations.
Every landlord faces costs in all areas of their properties and balancing the costs against rental income is a constant battle. Meeting obligations as a landlord also means effort and cost and there’s a definite need for keeping up with regulation and legislation changes, both those instigated by the local authority in which the property resides and those that become UK law. Falling foul of these can lead to fines for not passing inspections, loss of rental income and in the worst-case scenario, legal prosecution.
Even though there might be additional costs to be incurred in either bringing a certificate up to the minimum E rating, there are benefits to improving a property’s energy efficiency.
The obvious benefit of obtaining an EPC that’srating E or higher is to avoid the costs of non-compliance but there are other gains to be realised too. Essentially, the higher the rating, the less a property costs to run.
With the continually rising energy prices for the consumer, a property with a high energy efficiency rating is going to be attractive to a tenant. There are multiple studies that show the potential savings that could be made on heating in properties by comparing costs at the various levels of efficiency ratings.
Increased tenant satisfaction can lead to a cost saving in reducing the number of times tenancies change hands. Not having the work, admin and costs associated with changing tenancies regularly is a clear saving. This is similarly applicable to a reduction in rental void periods.
Property improvements to increase energy efficiency can also reduce long term maintenance costs. Undertaking jobs such as loft insulation, double glazing, using renewable energy sources all contribute to energy efficiency and property maintenance. Landlords may qualify for UK Government Grants related to energy efficiency improvements, and there are also schemes such as Feed-In tariffs, which can benefit landlords greatly.
A more efficient property may also be able to command a higher selling price. Energy efficiency has become a property selling point even if it hasn’t yet hit the levels of location, location, location, kerb appeal and size. Because the EPC has become part of the process of selling a property, potential buyers have become more savvy
The change in regulation for EPCs starting from April 2018 is being driven by the UK’s target of reduced carbon so the obvious benefit is going to be environmental. Despite the concerns about the environmental health of the planet, many UK citizens still need to be compelled to adopt measures to reduce carbon footprints, reduce reliance on carbon fuels, and conserve resources like energy and water. Even though legislation is enforcing the change, landlords with compliant EPC ratings can conduct their business in good conscience they are “doing their bit” for the environment.
A Good Reason
Energy efficient measures are an investment. As a landlord, it means ensuring the meeting of compliance standards and not falling foul of the law, while also economising properties making them more affordable and more appealing for prospective tenants and buyers.