As a homeowner, you may not have paid much attention to the energy efficiency rating of the property when you bought it; if you’ve lived in your current home for more than ten years and aren’t planning to move any time soon, you may not even have an EPC.
However, as a landlord, there are several reasons why you not only need to have an EPC but also should be concerned about your property’s energy rating.
In October 2008, new rules came into force requiring every property to have an EPC before being marketed for rent, with the certificate being made available to prospective tenants and a copy given to the tenant upon moving in. And since 9th January 2013 (in England, dates can be different for different countries), it has been a legal requirement for all advertisements for rental properties to clearly show the energy rating, allowing tenants to see which properties are likely to be more energy efficient and therefore incur lower heating bills.
This means the EPC rating has been a consideration for tenants for the past nine years and, in areas where there is a lot of competition, it could have been making the difference between a quick let and the property staying on the market a little longer. A recent survey of more than 3,000 tenants revealed that 42% consider the ‘green credentials’ of a property important when making a rental decision and that figure rises among tenants over 25, who have more experience of paying utility bills and having to manage living costs.
So, if you are among the 27% of landlords who don’t know their property’s energy rating, as energy company E.ON found in a survey undertaken earlier this year, look out your EPC now, because the government has estimated that one in ten rental properties will fail to meet the new minimum standards that are coming in.
New legislation from April 2018
From 1st April next year, it will be unlawful to let a property with an energy rating of F or G, as shown on the EPC. The new law will immediately apply to new lets and tenancy renewals, and come into force for all existing tenancies two years later, on 1st April 2020.
Local authorities can impose a civil penalty of up to £4,000 on landlords who fail to comply with the new regulations and those whose properties are still not up to standard after 3 months could face a fine of up to 20% of the rateable value. On top of that, landlords could stand to lose hundreds, if not thousands of pounds of rental income while the property is legally unlettable.
As such, if your buy to let property is not currently rated E or above, you should take steps right away to improve its energy efficiency. As environmental issues increasingly impact legislation, it’s possible that regulations will tighten up even further over the coming years, so it may be wise to see if you can get the rating up to D or above, to give you the best chance of not having to carry out any further energy efficiency improvement works in the foreseeable future.
There are certain situations in which an exemption may apply, including if a sitting tenant refuses to give consent for improvement works to be carried out and if carrying out the required measures would result in a devaluation of the property of more than 5%. The legislation also states that the requirement to comply only extends to ‘appropriate, permissible and cost-effective’ improvements - further comprehensive information can be found on the Residential Landlords Association website.
If you need to have an energy assessment carried out on your property, you can search for an energy assessor on the DCLG website.
There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.