A Guide for Landlords: The EPC 'C' Energy Efficiency Target
by Property Investments UKThe Property Investments UK editorial team have been researching and writing about the UK's property market for more than a decade.
Climate change and energy efficiency are serious issues today. That means landlords need to know about how energy efficiency affects them and their buy to lets. Something landlords particularly need to know about is the Minimum Energy Performance of Buildings Bill, which could mean new buy-to-lets will need a minimum EPC rating of C, as soon as 2025.
- What You Need to Know About EPCs
- What Landlords Need to Know About EPCs
- What the New EPC C Energy Efficiency Target Means
- The Cost of Complying with the EPC C Energy Efficiency Target
- Exemptions to EPC C For Landlords
- Enforcement and Fines for Failing to Meet EPC Standards
- What Landlords Need To Do About the EPC C Energy Efficiency Target
What You Need to Know About EPCs
EPCs are Energy Performance Certificates. EPCs were introduced in 2007. They are a way of measuring the energy performance of a building. EPCs are compiled following a property assessment by an accredited energy assessor. The assessor considers several things that affect energy efficiency such as doors and windows, insulation, heating and lighting.
An EPC gives a property an energy efficiency rating from A (the most efficient) to G (the least efficient) and is valid for 10 years.
A current Energy Performance Certificate – one that has been issued within the last 10 years – is needed whenever a property is first built, when it is sold and when it is let out.
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What Landlords Need to Know About EPCs
The Domestic Minimum Energy Efficiency Standard (MEES) Regulations and specifically the Energy Efficiency (Private Rented Property) Regulations set a minimum energy efficiency level for domestic private rented properties.
Since 2018, for new tenancies and 2020, for existing tenancies, the Domestic Minimum Energy Efficiency Standard means a property needs to have an EPC of at least band E if it is to be let out. Properties with an EPC rating of F or G cannot be let out unless work is carried out to improve their energy efficiency or if they are exempt.
What the New EPC C Energy Efficiency Target Means
As part of an aim to reduce carbon emissions from buildings, achieve net carbon zero and improve the energy efficiency of homes, there is currently a proposal to reduce the minimum EPC rating for rental properties. This could move from E to C possibly as soon as 2025. Previously the aim was for these new energy efficiency targets to apply from 2030. This change is being considered as part of the Minimum Energy Performance of Buildings Bill which is currently being considered by parliament.
The proposals would mean that for all new tenancies started after the end of December 2025 a property will need to have a minimum EPC rating of C. They also mean that all existing tenancies would need a minimum EPC rating of C from December 2028.
Due to a large number of older properties in the UK, it is estimated that around two-thirds of all homes in the UK could have an EPC rating poorer than C and so would not comply.
As part of the proposals on energy efficiency there is a target for all residential properties, not just buy to lets, to meet EPC C by 2035. There is also a target for mortgage lenders to have an average band C across their lending book by 2030.
EPC requirements for a rental property in Scotland - These details relate to EPC requirements for rented property in England and Wales only. Although there is also a commitment to improving energy efficiency in rented properties the EPC regulations and proposed changes to them are different in Scotland.
The Cost of Complying with the EPC C Energy Efficiency Target
Some estimates suggest that the cost of upgrading a property from an EPC rating of, for example, G to C, could be almost £27,000. It is also suggested that some properties may not be able to be upgraded at all.
Landlords won’t necessarily have to meet all the costs of upgrading their buy to lets, however. Currently, there is a cap (£3,500) on the amount landlords are expected to spend on upgrading a property. It is likely there will be a cap on what has to be spent under the new proposals. Landlords may also be able to take advantage of any energy efficiency grants that are available to pay towards the work too.
Exemptions to EPC C For Landlords
Currently, some rental properties qualify for an exemption to the minimum EPC rating of E. It is likely that there will also be some exemptions under the proposed new rules.
Exemptions that may be possible include if there is an affordability exemption, if it is not technically feasible to improve the EPC rating or if a party like a tenant or a mortgage lender, refuses consent. Landlords buying a new property also have six months to meet the EPC requirements.
Under current rules, if a property meets the criteria for any of the exemptions you can still let it once you have registered the exemption on the PRS Exemptions Register. An exemption lasts for 5 years.
Enforcement and Fines for Failing to Meet EPC Standards
Currently, local authorities have responsibility for enforcing breaches of the MEES regulations. Landlords whose property fails to meet the minimum EPC standard can be fined up to £5,000. A similar enforcement regime is likely to apply if new regulations are introduced.
What Landlords Need To Do About the EPC C Energy Efficiency Target
Here are some things that landlords could consider doing in advance of the proposed new regulations:
If looking to buy a new buy-to-let, check the EPC first. Consider what work you may need to carry out on it either now or in the future in order to be able to continue to let it.
You can check the EPC for a property that already has one, here.
Find out what the EPC rating is for your current property or properties if you don’t know already. Property bought before 2007 will not have an EPC and it may have expired for some bought since then. It may be worth having an energy assessment carried out now to establish the relevant rating and obtain suggestions for improvements.
Find out what work might be needed, likely costs, or if the property might qualify for an exemption.
The energy efficiency work needed might be something more complex like a new boiler, double glazing or insulation. It might also be something simple like new energy-efficient lighting.
If you are planning any refurbishments to your property anyway take the proposed new regulations into account. It may be that work you are planning to do in any case will help your property comply with the proposed changes to the minimum energy efficiency standard.
If a rental property does not and cannot be made to meet the new proposals consider whether it might be advisable to sell it now. Properties with poor EPC ratings could be impossible to let and difficult to sell in the future.
It is worth bearing in mind that the Minimum Energy Performance of Buildings Bill is currently only a proposal and not law as yet. Should it become law the dates from which it applies and specific details may differ too. It is a good idea to keep an eye on further developments and plan ahead, however.
Also bear in mind that houses and flats that have a good EPC rating are warmer and cheaper to run. That should make them more attractive and affordable to tenants too. So there can be more benefits to landlords in investing in energy-efficient property other than to comply with minimum energy efficiency standards.