Landlord Association iHowz on Upcoming Buy to Let EPC Changes

Peter Littlewood, co-founder of iHowz Landlord Association, explains the upcoming changes to EPC requirements for buy to let property and what this means for landlords.

iHowz Landlord Association are very pleased to make this the first of what we hope will be many contributions. iHowz, Mortgages for Business and Alan Boswell Insurance are joining forces to exhibit at the forthcoming FutureBuild show, under the banner Future Landlord. The exhibition aims to promote green innovation in the construction and housing industries, so I would like to take this opportunity to remind landlords of the upcoming changes to EPC requirements, and their need to improve their energy efficiency, where possible. 

The Government have been trying for years to ‘persuade’ landlords to adopt energy-saving matters, from free light bulbs, to discounted loft insulation.   

Their persuasion has now changed to become a legal requirement to improve, if required. 

What are the current MEES requirements? 

Introduced in 2016, the Minimum Energy Efficiency Standards (MEES) has required all rental property to meet a minimum EPC rating of ‘E’ since April 2020. I.e., any property with an ‘F’ or ‘G’ rating cannot be let out, unless an exemption is allowed, and has been applied for. 

Exemptions are defined as: 

  • High-cost exemptions – if making any more improvements would require spending more than the cost-cap, and upgrades have already been made up to the cost-cap (currently £3,500), then a property is exempt.  
  • Seven-year payback exemptions – any requested improvement that will take more than seven years to pay back is exempt. Double glazed windows are a good example of this. 
  • All-improvements-made exemptions – where the actual EPC rating is the same as the potential rating, i.e., no improvements can be made to improve the energy efficiency. 
  • Wall insulation exemptions – the walls on the property are not suitable for insulation. This needs to be confirmed by a surveyor. 
  • Consent exemptions – consent to carry out the work is being withheld by an interested party.  Some examples are: 
  • a sitting tenant 
  • freeholder, for leasehold property 
  • mortgage company 
  • Local Council – e.g. Planning or Building Control 
  • Devaluation exemptions – to carry out the work will devalue the property. This will need to be confirmed by a surveyor. 
  • New landlord exemptions – the owner has inherited/bought a property with a sitting tenant, but does not propose to remain a landlord.  Note that this one is difficult to obtain. 

The exemption application process can be found at prsregister.beis.gov.uk/ 

I have stated that this is ‘where required’. Since October 2008, rental properties have been required to have valid EPCs at a change of tenancies, but any let that pre-dates this and has not been renewed, will not require an EPC. 

If you own an HMO (House in Multiple Occupancy) on individual room lets, there is no requirement to provide an EPC, even if you have one. Therefore, any HMO that has been let on room agreements since before Oct 2008 also won’t need an EPC, even if there has been change of tenants. 

And I’ve left the most confusing one until last: listed buildings. The law states that if all the requirements to upgrade the property (stated on the EPC) are not possible because of its listed status, you don’t need the EPC.  I.e., you need an EPC to prove you don’t require an EPC!! 

Note, additionally, that it is likely there will be changes to MEES soon. 

What do the changes coming mean for landlords?  

It is proposed that the EPC rating will change to a minimum of ‘C’ within the next few years – 2028 has been mentioned a lot. Furthermore, there is a strong suggestion it be raised to a minimum of ‘B’ two to three years after that. 

Coupled with that, the cost cap (currently £3,500) will, almost certainly, be raised to £10,000, and it might be that all rental properties will require an EPC. So, landlords are going to have to be very proactive in the immediate future. 

Make no mistake, it is a big ask to get a property up to a ‘C’, let alone a ‘B’ rating. The Government regularly publishes data on the number of properties in each EPC rating, not differentiating between rental and owner-occupier. They have recently published the figures for 2008 to the end of 2021, which can be seen below: 

It can be seen quite clearly that the majority of current properties fall into the ‘C’ or ‘D’ range.  The actual figures for 2021 and 2008 are: 

2008 

‘A’ = 0.04%   

‘B’ = 12%    

‘C’ = 28%    

‘D’ = 32%    

‘E’ = 20%    

‘F’ = 7%    

‘G’ = 2% 

2021 

‘A’ = 0.45%   

‘B’ = 16%    

‘C’ = 38%    

‘D’ = 33%    

‘E’ = 10%    

‘F’ = 2%    

‘G’ = 1% 

 

This shows that after 13 years effort, and substantial investment, the biggest rise is in ‘C’ rated properties.  It will take substantial effort to move even more properties to ‘C’. 

All the requirements to improve the energy rating on a rental property are driven by the EPC. There are moves afoot to amend the way EPC’s are calculated, but this is a whole other topic for another time. 

 

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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