This week I had a meeting with a landlord to advise him on a 6 bedroom all en suite property in Maidstone that we have taken over management. I told him that en suites are in strong demand and provide a better quality of tenant. We let all the rooms within 10 days of taking the instruction! You can see the advert here.

The landlord had spent a lot of money on the property, completely gutting it and adding lots of extra insulation. Our discussion then turned to energy efficiencies. And it led me to think, that it was time to post about the EPC legislation changes that are heading our way next year.

An EPC (energy performance certificate) is always required every time a property is put up for sale or for rent, as evidence of how energy efficient the property is. Each certificate is graded from A to G; A indicating the highest level of efficiency, a well insulated, well maintained home. G is the lowest rating.

What’s changing?

In 2015 new legislation was passed that from April 2018, all properties in England and Wales will have to meet a minimum energy efficiency standard (MEES). This is set at an E rating for all types of domestic and non-domestic property.

Effectively, this means that from April 1st, it will become illegal to rent a property with an EPC rating of F or below. Obviously, this could have a massive impact on landlords as some will be prevented from letting their properties until an EPC (E or above) is issued.
If you are a landlord with an existing tenancy agreement in place and a EPC rating or F or G, don’t panic. Existing tenancy agreements are not affected by the changes, yet. From 1 April 2018, the regulations only apply when granting:

• a new tenancy to a new tenant, and
• a new tenancy to an existing tenant, i.e. any extension or renewal to an existing tenant.

However, from 1st April 2020 the regulations will apply to ALL privately rented properties in scope of the regulations.

What are the rules?

The new EPC rules apply to

• All domestic properties in the private rental sector
• All properties leased between 6 months and 99 years
• All properties in England and Wales. (Scotland currently has a similar legislation that is already in place.)

Landlords are required to get a new EPC certificate every ten years. I think it’s important to note that existing EPCs cannot be adjusted. If you believe the rating of your property has changed, you must pay for a new test and certificate to be issued.

Exemption from the rules

There are a few exemptions. Such as the property being listed or officially protected, and any energy efficiency improvements unacceptably altering it. Or if the property if due to be demolished by the seller or landlord and evidence can be provided of that. However, these are applicable in a relatively small number of cases. The full list of EPC exemptions can be found on the government website. If one of these apply, you can register for an exemption on the central register, which will be launched this month.

Compliance + enforcement

The headlines are; unless there is an accepted exemption, landlords could face a penalty of up to £5,000 for failure to meet the minimum efficiency requirement. If you believe an exemption applies to you, you will need to provide evidence to that effect. However, if a local authority suspects that a landlord with a property in scope of the regulations is not compliant, or has not sufficiently proved evidence of an exemption, the local authority can serve a compliance notice. This notice requires the landlord to provide further information to evidence compliance. Where it is not provided or is not sufficient to meet standards, the local authority can issue a penalty notice.

The penalties for non-compliance are:

Providing false or misleading information to the PRS Exemptions Register	£1,000
Failure to comply with a compliance notice from a local authority	£2,000
Renting out a non-compliant property (Less than 3 months non-compliance)	£2,000
Renting out a non-compliant property (3 months or more of non-compliance)	£4,000

What to do if your rental property EPC is graded F or G

In my opinion, landlords with properties who had an EPC rating below an E at last inspection, should begin preparing now for April 1st. The first thing to do is to get an up-to-date EPC carried out. EPC calculations change regularly so it is possible that without doing anything, you will receive a different rating to the one you received before. If the new EPC rating is still below an E, you will be forced to make efficiency improvements in order to let your property.

Ways to improve your rating

The information provided in a completed EPC report is incredibly helpful. The report will contain a list of recommended measures for improving your property’s energy efficiency performance.
There are various improvements that can be made to improve a rating, and it’s important to remember that these may benefit the landlord as well as the tenant, as some tenants may be willing to pay more for properties that are energy efficient.

Examples of possible improvements are:

• Thermostat room heaters
• Cavity wall insulation
• Solid wall insulation (internal or external)
• Draught proofing
• Improved hot water showers/systems
• Fan assisted replacement storage heaters
• Flue gas recovery devices
• Ground source heat pumps
• Heating ventilation and air conditioning controls
• High performance external doors
• Hot water controls (including timers and temperature control)
• Loft or rafter insulation (including loft hatch insulation)
• Pipework insulation
• Gas fired condensing boilers
• Replacement glazing
• Oil fired condensing boilers
• Warm air units

Making the most of government initiatives

I’ve seen an estimate of approximately 330,000 privately rented properties being impacted by the rule change, because they are currently EPC rated F and G. That is a lot of landlords who will very suddenly find themselves potentially unable to let their properties. Equally it will impact tenants as – at least in the short term – the number of viable letting options are reduced. Many landlords have been preparing for the legislation change by taking advantage of various government ‘Green Deal’ offers. These schemes are a great way to make improvements such as installing insulation and replacing glazing and boilers, that will improve EPC ratings. For those that haven’t taken action yet, it’s time to start! The rules are changing and no one wants landlords or tenants to be negatively affected because of poor planning. I’m keen to hear from anyone affected and get their views. Feel free to drop me an email anytime.