It’s a tough time to be a landlord these days. What with the constant updates in legislation and case law, landlords need to stay on top of what is an increasing pile of legislation. One of those niggly bits to think about is Energy Performance Certificates (EPC) and their ratings.
You will probably be aware that since 1st April 2018 private landlords have been required to provide tenants with an EPC certificate with a minimum rating of E.
Although it has yet to be decided, this minimum rating is currently going through a review to potentially increase it to a C.
With all the potential changes to the EPC system coming up, I have regularly been having conversations with HMO investors about what EPC rating their property needs to have and whether they need to provide individual tenants with a copy of the EPC certificate.
You may be surprised to hear that the rules for single let properties do not apply to HMOs and there is no requirement for HMO landlords to provide tenants with a copy of an EPC certificate. As part of this, it’s important to remember that an HMO is classed as a commercial rather than a residential property.
Here’s what the government guidance says about the providing of EPC certificates for HMOs:
“An EPC is not required for an individual room when rented out, as it is not a building or a building unit designed or altered for separate use. The whole building will require an EPC if sold or rented out.”
This means that landlords with an HMO that has shared essential facilities such as bathrooms, showers, toilets and / or a kitchen and have individual agreements with each tenant do not need to provide an EPC.
The requirement for an EPC comes into place when you have a mixed property that has some self-contained units, where there are completely self-contained flats, or a house let to sharers (with one contract between all occupiers).
This does not mean however, that HMO landlords will not need to have an EPC Certificate for their property. An EPC will certainly be required when purchasing and selling along with when remortgaging. Furthermore, at Home-Share we do comply with these requirements anyhow so as to avoid any potential conflict with the requirements imposed upon landlords as part of the Deregulation Act.
An analysis of the licensed HMOs in Medway reveals that the largest percentage of HMOs have a rating of D (42.4%), however it was interesting to see that around 6% had expired and just over 8% could not even be found on the register.
The graph below breaks this down and it could simply be that HMOs with an EPC of E or below are unincumbered or have a mortgage with a long fixed-term. This is because mortgage lenders will generally require a minimum EPC of E, however a growing number are now increasing this to a C or D.
Although landlords are not required to provide a copy of a valid EPC certificate to tenants, they should still bear in mind how a better EPC rating will definitely help improve energy efficiency, therefore reducing what could be a large increase to their energy bills (and dent in profits).
I hope you found this article insightful! If you have any questions relating to this or any other HMO related issue then I will be more than happy to help! Just pop a reply to this email and I will be in touch.