What is an EPC rating?
Since May 2010, every home in the UK that is bought, sold, or rented legally requires an Energy Performance Certificate (EPC) that rates the property for energy efficiency. Here is a comprehensive guide for property investors explaining why the EPC energy report matters, how the rating process works, what the results mean, and more.
Why is a high EPC rating important?
An EPC rating and energy report is a legal requirement that gives the potential owners of a property a clear idea of the current energy efficiency of the property - how much energy the home uses for heating, cooling, and running appliances. A high EPC rating means the home is very energy efficient, making it more appealing to buyers and renters because the energy bills will be lower than in a low EPC rated property. EPCs are valid for 10 years and you can have your property re-evaluated at any time if you invest in energy efficiency improvements.
Energy Performance Certificate
The process of granting an EPC is carried out by EPC assessors in England, Wales, and Northern Ireland, and by government -registered Domestic Energy Assessors in Scotland. The process involves a survey of the property, after which the assessor will produce your Energy Performance Certificate. The energy report will include:
- Estimated energy costs for the property
- A current energy efficiency rating from A to G, with A being the highest level of energy efficiency
- A potential EPC rating if the property is improved in key areas through energy efficiency improvements
Keep in mind that existing dwellings will require a RdSAP EPC (Reduced data Standard Assessment Procedure), and a new dwelling will require a full Standard Assessment Procedure. Be sure to keep all documents that relate to the installation or upgrade of relevant energy efficiency projects for the home, as the process only accounts for measures that can be seen or proven.
For landlords, it is important to note that as of an update to legislation in 2018;, it is a legal requirement to have a current EPC that is rated E or higher for any rental properties or to take in a new tenant. Your property also must meet minimum energy efficiency standards (MEES) for domestic lettings.
As a property buyer, this energy report is a useful document that can help you forecast your energy bills, improve your energy rating, and plan improvements to reduce energy bills through energy-efficient measures. As green living trends continue to gain traction with potential buyers and renters, and those who want their money to go further; a high energy rating is a useful way to attract renters to your rental properties, show their potential savings on energy bills, and possibly help increase the value of the property when the time comes to sell.
Estimated energy costs
One of the most useful aspects of this energy report is that it shows estimated energy costs not only at the current level of energy efficiency but the potential savings if certain upgrades and energy-efficient measures are applied. This is divided into 3 key categories – lighting, heating, and hot water – and projects savings over the next three years in line with the potential energy efficient rating the domestic energy assessor believes the property can reasonably achieve.
This is especially useful for buy to let property investors, as it can help you better understand the returns you will get on energy efficiency upgrades. While these savings may be passed on to the renter in most cases, the lower lighting, heating, and hot water costs can make the property that much more appealing to renters, allowing you to increase your rental yield from rental properties, improve attractiveness to potential buyers, and maximise profit when selling the property.
Energy-efficient rating bands
Your property will be assigned Standard Assessment Procedure (SAP) points by the domestic energy assessor for each element of the assessment process, grading it for energy efficiency against a standardised energy efficient rating system.
When grading the home, the EPC assessor will look at many different aspects of the property. These results shouldn’t be examined without context when considering an investment. For example, an old home that may be a very attractive rental or investment property will almost always have a lower rating than a new build home.
Typically, the assessor will look at the following in addition to the age of the building:
- Total floor space – Larger homes with higher volume rooms usually require more lighting and heating per square foot than smaller homes.
- Lighting – The percentage of energy-efficient lighting (LED) in the property.
- Windows – Single -glazed windows or poorly sealed windows will receive a lower rating than modern, sealed windows.
- Hot water heating – Heating systems that are fully insulated and modernised will receive a higher rating than old or non-insulated systems.
- Airtightness – The better the home is sealed against the elements, the more energy-efficient it will be to heat or cool. Weather tightness will include examining external doors and windows, attics and basement areas, entry points for pipes, etc.
The final score will place your property within a band, grading it from A (most efficient), through to G (least efficient). In the UK, the average home meets a D rating. It’s important to note that to rent out a buy to let property, the lowest EPC rating band your property can fall into is E.
EPC rating A
This is for properties that reach 92-100 SAP points. These homes have the highest energy efficiency, and will usually have exceptional insulation, modern energy-rated heating systems, passive home design elements, and high-efficiency green technology like solar panels, heat pumps, and smart energy-saving upgrades.
EPC rating B
These properties score between 81-91 SAP points, which is still very high. They may be older but recently upgraded properties where the owners have consciously invested in energy-efficient products and technologies or homes that have been built fairly recently.
EPC rating C
‘C’ rated properties score between 69-80 SAP points, which is still a respectable rating that is above the UK average. These homes may be older and lacking in certain areas but have some key upgrades that promote energy efficiency, including insulation, weatherproofing, or solar panels. These homes are a good opportunity for investors to upgrade their EPC rating and the value of the home.
EPC rating D - least efficient
This is the average rating for residential buildings in the UK, scoring between 55-68 SAP points. These homes often have a lot of opportunities for improving the EPC rating, and typically have elements such as old boiler/heating systems, unused/no secondary heating systems, poor air tightness, old/inefficient insulation, and single glazing. In these homes, simple and affordable upgrades can make a significant difference to the home’s comfort, renter appeal, and value.
What is the Environmental Impact Rating?
As part of the EPC, you’ll also receive an Environmental Impact Rating (EIR) that determines the carbon footprint (carbon dioxide emissions or carbon emissions) of residential buildings. This is also banded from A to G and, as with the EPC rating, the higher the EIR, the lower the carbon emissions and the lower impact the property has on the environment. In addition to getting a current EIR, you will also get a potential EIR to show how you can upgrade your property to reduce carbon dioxide emissions if you want to do so.
How to improve the EPC rating
There are many ways to improve your property’s EPC rating, and many of them are affordable too. These projects don’t often impact the aesthetics of your property but will make it more comfortable and affordable to live in – and it improves the home’s value too. Here are some of the most effective ways to improve your EPC rating.
Internal wall insulation in all the main cavities of a home will help improve your EPC rating. This can be a rapid and affordable process, carrying potential savings of around £160 per year. External wall insulation will also help make the home easier to warm, can improve the external look of the property, and protect the walls and foundation from moisture damage. Typically, this is best suited to homes that were built post-1920s and can improve your rating by 5-10 points.
Because heat rises, a property can lose as much as 33% of its warmth through an uninsulated ceiling space. For maximising efficiency for your EPC rating, it’s recommended that you install loft insulation that is at least 270mm thick with a 100mm layer between the joists and a 170mm perpendicular top layer. This can improve your rating by 10-15 points.
Installing double glazing will add several points to your EPC rating and is highly recommended if you have old single glazing windows. However, it will not make too much of a difference if you have older double-glazed windows.
Upgrading to a high efficiency condensing boiler is another good way to add up to 20 points to the property’s EPC rating. This will depend on how old and inefficient the current boiler is, keeping in mind that boilers should be replaced every 10-15 years. If the home has a hot water cylinder, you should insulate this tank to gain a few points affordably and save on water heating costs.
More efficient secondary heating
Secondary heating systems like fireplaces, space heaters, and fixed wall heaters are also considered in the EPC assessment and upgrading to a more energy-efficient system (for example, a wood-burning stove rather than an open fireplace) can help gain additional points.
Do all buildings need an EPC?
No. Since 2013, listed residential buildings have been exempt from EPCs. However, you will need to ensure that it meets minimum requirements for energy efficiency if you intend to sell or rent the property. The easiest way to make sure that your residential buildings are meeting these standards is through an EPC assessment. However, you can disregard any suggestions that can harm the authenticity of the building. You may also need permission to install certain upgrades, including renewable energy sources, a new high-efficiency boiler, or weatherproofing, and some upgrades like double-glazing or insulation may be denied.
How much do EPCs cost?
EPCs are generally very affordable, but they will vary from provider to provider. You can expect to pay around £75-£120, especially if the assessment is through a real estate agent. Third-party providers can also assist you, and generally vary the price according to the size of the property.
Let our brokers assist you
If you have any questions about the EPC rating process or want to speak to a mortgage broker about buying a buy to let property investment, our team is ready to assist you with every aspect of this process.
With over 20 years of experience and access to the widest range of lenders, we help our clients negotiate the most favourable terms for residential buy to let mortgages, securing the best deals through reputable lenders and supporting your investment goals. Contact our team of experienced, independent brokers today and let us help you source and finance your ideal buy to let property.
*Please note that this tool was last updated in September 2021*