Proposed Changes to EPC Ratings

The government are planning to announce the proposal of new legislation this year, which will require all newly rented properties to have an EPC rating of at least Band “C” from 31st December 2025, with an extended deadline of 31st December 2028 for existing tenancies

In the UK, all domestic and commercial properties for rental are required to have an Energy Performance Certificate (EPC) to confirm the property’s energy efficiency. Ratings range from “A” for the most efficient”, down to “G”.

The current government regulations state that any property being let in the private rental sector (PRS) must have an EPC rating of “E” or above, with certificates valid for 10 years. After 10 years, landlords only need to renew their certificates when the property is re-let to a new tenant.

As part of the government’s drive to increase energy efficiency and achieve net-zero carbon targets by 2050, it’s increasing its commitment to achieve greater energy efficiency in rented homes.

Whilst energy prices continue to soar and the cost of living dramatically rises, more investors, tenants and potential buyers are taking a keener interest in a property’s EPC ratings than ever before.

Proposed new legislation (expected to be announced some time in 2022) will require all newly rented properties to have an EPC of at least Band “C” from 31st December 2025. For existing tenancies, the deadline is not until 31st December 2028.

Approximately two-thirds of homes in the PRS have an energy rating of “D” or below, which means around 3.2 million properties in England and Wales (67%) will require work to meet the new government targets.

This proposed legislation could also provide an opportunity for landlords wishing to improve the energy efficiency of their properties for current tenants, whilst also making them more appealing to future tenants - and investors.

Recent industry research has shown that tenants moving from a home with an “E” rating to a “C” rating could potentially save £725 (on average) per annum, on their energy bills. Therefore, choosing an energy efficient home is not only helping the environment, it also offers tenants an attractive cost-effective financial incentive.

It is estimated that landlords required to invest in the upgrades will need to spend up to £10,000 (approximately) per property to meet the new “C” rating required. At present, that figure is estimated to be around 67% of properties in the PRS.

If action is required but not taken, landlords could find themselves with a property they cannot rent. In addition, the fines imposed for not having a valid EPC will also be increasing from £5000 to £30,000.

A recent industry survey highlighted that only 54% of landlords with up to 3 properties knew about the proposals, whereas 80% of landlords with 10 or more properties were knowledgeable about the new EPC changes needed.

It also appears that landlords with buy-to-let portfolios are more aware of the Government’s new EPC requirements than non-portfolio landlords.

Approximately 20% of those landlords with under 10 properties said that they would be willing to upgrade in advance of the new legislation coming in.

It is important therefore, that landlords should start to investigate their properties current EPC certificates, so if upgrades are required, they can allow sufficient time to start preparing for the proposed changes.