After considerable uncertainty around when the Minimum Energy Efficiency Standard for buy to let property would change, the Government Bill is one step closer to passing, and landlords need to be aware of a new deadline and possible exemption threshold.
The Minimum Energy Performance of Buildings Bill had its second reading in Parliament on 24th March, 2023. While still not fully legislated, there are some key changes to the initial Bill that has long been a hot topic in the property investment community.
New EPC Requirements for Buy to Let Property
All tenancies for privately rented property “must be at least EPC Band C from 31st December 2028 where practical, cost-effective and affordable”.
It’s up to the Secretary of State to define what is “practical”, “cost-effective”, and “affordable”.
It is unclear whether there is an explicit limit to how much money landlords need to spend per property before they can apply for an exemption. Currently £3,500, it’s been widely assumed that this would increase to £10,000 under the new Bill.
The original Bill had a staggered deadline for new tenancies (2025) and all tenancies (2028). The two have been combined as a 2025 deadline is no longer feasible.
New EPC Requirements for Your Own Home
Under this legislation, homeowners are required to ensure their properties “achieve at least EPC Band C by 2033”.
However, the Bill sets out the following exemptions:
- An occupant or anyone else whose permission is needed for works to be carried out has explicitly refused such permission;
- It is not technically feasible to fulfil the duty; or
- The cost of carrying out works to fulfil the duty would exceed £20,000.
What’s unclear is whether the £20,000 exemption limit will also apply to PRS properties if anything below this is deemed “affordable”. As this is double what the sector anticipated to be the exemption threshold, this could prove incredibly challenging for many landlords to finance cost-effectively.
New EPC Requirements for Mortgage Lenders
The Bill also includes new regulations for mortgage lenders, requiring that “the average energy performance level of their domestic portfolios is least EPC Band C” by 31st December 2030.
Once passed, mortgage lenders must look at their portfolios carefully to meet the new regulations. As the deadline approaches, we may see lender criteria changing to exclude properties with lower EPC ratings, making it challenging (and probably more expensive) for those with less energy-efficient properties to attain a mortgage.
New EPC Requirements for Social Housing Landlords
The Bill requires social housing landlords to “ensure that a significant amount of their residential properties are at least EPC Band C by 2030”. The Secretary of State still needs to define what “significant amount” means.
New EPC Requirements for Commercial (Non-Domestic) Buildings
The new EPC requirements for commercial properties in this Bill currently only apply to “rented non-domestic buildings”, and not commercial owner-occupiers. Commercial investment landlords must bring their properties up to an EPC Band B by 2030. Current exemptions include:
- Where it is not technically feasible, and
- Where it is not cost-effective [as defined by the Secretary of State].
It’s important to say that this is still not law yet, but it is another step closer. Therefore, we strongly recommend all property investors start to plan how to fund necessary improvements (if you haven’t already). Read our useful guide on Funding Buy to Let EPC Improvements, or call 0345 345 6788 to discuss your options.
You can view the full Minimum Energy Performance of Buildings Bill and its progress on the Parliament website here.
26th April 2023