Since 1 April 2023, landlords could only rent out a domestic property if it had an Energy Performance Certificate (EPC) rating of E or above. The government has proposed yet more changes to the EPC regulations to help them achieve their goal net-zero carbon by 2050. Vili Chung, Partner at Tallents Solicitors in Southwell, explains what steps landlords should be taking now to protect their property portfolio.
Energy Performance Certificates in the private rental market
Introduced on 1 August 2007, Energy Performance Certificates (EPCs) show the energy performance of a property to prospective tenants or buyers. An up-to-date EPC is required every time a property is let, offered for sale or built. A qualified energy assessor carries out the assessment of the property and the EPC is lodged on the Energy Performance of Buildings Register.
All domestic private rented properties fall under the Domestic Minimum Energy Efficiency Standard (MEES) Regulations. This includes properties which are:
- Let on a specific type of domestic tenancy: assured tenancy, regulated tenancy or a domestic agricultural tenancy.
- Legally required to have an EPC (most likely it will have been marketed for sale or let, or had significant home improvements made within the last 10 years).
How do the proposed changes to EPCs affect landlords?
Since 1 April 2023, landlords could only rent out a property if it had an EPC rating of E or above. If their property had received an EPC rating of F or G, then they needed to improve the property’s rating up to E or higher before agreeing a new let or apply for a valid exemption.
Also, since 1 April 2023, it has become an offence to continue to let out a property if it does not have a rating of E or higher. Landlords who are found guilty may face a fine based on the rateable value of the property up to a maximum penalty of £5,000 per property.
If the rental property was empty, then the landlord did not need to carry out any efficiency improvements until it was let again.
What should landlords do to meet the proposed EPC requirements?
As part of their Clean Growth Strategy, the government is indicating that the EPC requirements for privately rented property will be increased further from 2030 when all newly rented properties will have to have an EPC rating of C or higher, where practical, cost-effective and affordable.
To protect the rental income from their property portfolio and ensure compliance, landlords should start investigating the energy efficiency improvements they can make sooner rather than later or explore which exemptions might apply to their property portfolio.
Exemptions for properties
To help landlords make the energy efficiency improvements, currently the government has implemented a cost cap of £3,500 (including VAT). The improvements can be funded through grants, for example from local authorities or Green Deal finance, or self-funded up to the cost cap.
However, if despite the improvements made, the property cannot be brought up to the required EPC rating, then there are various exemptions that a landlord can currently apply for to let a property with an energy efficiency rating below E. In short, these exemptions are:
- ‘All relevant improvements made’ – £3,500 has been spent improving the property to the best energy efficiency rating possible, yet it still falls short of E.
- ‘High cost’ – even the cheapest recommended measure would exceed the cost cap.
- Wall insulation – this is the only relevant improvement but it would negatively impact the fabric or structure of the property.
- Third-party consent – the tenant, another landlord, mortgagee, freeholder or planning department will not give consent for the improvements to be made.
- Property devaluation – by making the improvements, the property would be devalued by 5% or more.
- Recently becoming a landlord – if this has occurred, then you can claim an exemption for up to six months.
What should landlords now do?
At present, the government is indicating that the EPC requirements will still be increased further from 2025. Obviously, the impending general election may yet change things but our professional recommendation to landlords is that they start investigating the energy efficiency improvements sooner rather than later or explore which exemptions might apply to their property portfolio.
Tallents Solicitors can help landlords understand the changes and requirements in the regulations. Please call us on 01636 813411 or book an appointment to discuss your situation in confidence.
— — —
This legal content of this article is correct at the date of publishing. We recommend you seek legal advice with regards to your personal circumstances before acting.
— — —
Image by Rosy / Bad Homburg / Germany from Pixabay
