What Do The Upcoming EPC Regulation Changes Mean For Landlords?

In several recent consultation documents, the UK government has proposed new (EPC) energy performance certification regulations that would change the minimum energy efficiency standards for rentals, from an E to C. These changes could take effect as early as 2025 and will impact all the domestic rentals in England and Wales.

Currently, the minimum energy efficiency standard is allowed for a rental is an E rating for your EPC. The idea is to improve energy efficiency for all homes around the country, reducing carbon waste and progressing the government’s net-zero targets, as well as reducing the energy costs and overheads for renters.

These suggested changes are likely to be phased in, starting with new tenancies from 2025 and all tenancies will need to have a C grade by 2028. Penalties for non-compliance include fines of up to £30,000. What do landlords need to know about these new EPC regulatory changes?

Key Takeaways to the suggested Energy Performance Certificate (EPC) requirements:

• All new tenancies from 1 April 2025 and all existing tenancies by 1 April 2028 must meet band C or higher on an EPC.
• Increase the maximum fine level to £30,000 per property for each breach of the regulations.
• Requiring landlords to provide an EPC prior to a property being advertised and for a valid EPC to be in place at all times while a property is let.
• Increasing the cost cap to £10,000 inclusive of VAT per property.
• Updated affordability exemption regime to come into force on 1 April 2025
• The requirement for landlords to install ‘fabric first’ measures e.g. insulation.
• The private rented sector to support the uptake of smart meters.

What Is An Energy Performance Certification Rating?

The EPC rating was introduced for both England and Wales, in 2007. EPC stands for energy performance certification and it rates a property’s energy on a scale from A to G with A being the most efficient.

It is a landlord’s responsibility to ensure that the EPC rating is within the current UK guidelines and landlords need to update the EPC, at least once every 10 years. However, with these new regulations coming into effect it could be much sooner for your property.

A better EPC rating means a reduced carbon footprint and can make your property more attractive to renters and buyers as it means that their bills and utility costs are going to be lower. Ultimately, this means that they will have more money to pay towards their rent and other important living costs.

How Will These New EPC Regulations Impact Landlords?

With approximately 57% of existing properties at the beginning of 2021 given a D rating or worse, it is obvious that a lot of people will be affected by this change.

Jumping from an E rating to a C rating could potentially cost landlords £1000s.

Landlords need to formulate a plan to increase their rating and spread out the cost of the necessary upgrades over the next few years to avoid a large single expense.

To improve an EPC rating a landlord can expect to spend money on a variety of things including insulation for the property, heating, lighting and windows. Another important thing to note is that the government is phasing out old school boilers in favour of more energy-efficient options and rentals need to upgrade to these new solutions, not only because they will increase your EPC rating and lower the energy bills of the household, but also because as these older boilers are phased out parts and repairs are going to become increasingly expensive.

Under the new suggested EPC regulations if you wanted to advertise a rental from 2025 onwards to new tenants, you will need to ensure that you are compliant with a C rating, or better. You will not be able to advertise your property if you do not have a rating.

Five Ways Landlords Can Improve Their EPC Rating

We’ve mentioned already, there are a variety of ways in which you can improve your property’s EPC rating. But if you want to jump from an E up to a C, you will likely need to implement multiple changes.

Changes that you could look at implementing include:

1. Improving the property’s lighting. Old light bulbs and fixtures are notoriously inefficient and upgrading your lighting fixtures to LED bulbs can lower the overall energy consumption of a household
2. Improving insulation. Insulation is one of the simplest ways to reduce heating expenditures, and the requirements of a household to heat, perhaps all walls, floors and ceilings should be insulated properly for maximum effect.
3. Improving windows. For those properties where it’s possible, upgrading to at least double glazing or preferably triple glazing can help retain heat within the property, allowing for a reduced carbon footprint and less energy required for heating,
4. Installing an energy-efficient boiler. We’ve already mentioned that old school boilers are being phased out for more energy-efficient solutions. It’s well worth doing some research to identify energy-efficient boilers that will be cheap to maintain on an ongoing basis. This will not only lower your tenants heating and water bills but also likely keep your own property maintenance bills down simultaneously.
5. Use a smart meter. Smart meter technology allows you to more easily and accurately control and monitor, the energy consumption of a household. This will allow you to identify areas where energy consumption is large so that you can implement specific changes to help improve your overall EPC rating.

About Financial Help To Fund EPC Improvements

Making some of the improvements suggested in this article could be immensely costly, especially, replacing a boiler, windows, or adding insulation to the property.

Some landlord associations and regulatory bodies are calling for financial support that will help landlords make improvements to their rental properties. The Association of Residential Letting Agents (ARLA) believes that the new rules and requirements may not be realistic. And that many landlords will simply not be able to afford to make the required changes to keep their properties in line with these new regulations.

Additionally, landlords and letting agents have been particularly hard hit over recent years by tax and regulatory changes as well, which has all been combined with the impact of rent arrears due to the COVID 19 pandemic. This being said, it is likely that there will be numerous financing options to get funding to improve your EPC regulation.

Find out more information about this by visiting the government website. And by viewing the EPC consultation document.

Using Landlord Studio to Improve The Profitability Of Your Buy To Let Property

As you are making the required improvements to your property acquired energy improvements to your property, you will want to make sure that you carefully track all of the expenses associated with those improvements with software like Landlord Studio.

Landlord Studio allows you to easily keep up to date accurate digital records and carefully monitor and track all of your income and expenses. This will be absolutely vital, especially with making tax digital (MTD) coming into play in 2024.

Additionally, by using our smart dashboard and professional reporting features, you can quickly and easily identify areas of weakness within your buy to let property portfolio, allowing you to make informed tactical decisions to improve your portfolio’s overall profitability.