Energy Performance Certificates (EPCs) for Rental Properties in 2023: What are the big changes to Landlord Requirements?

What is the Energy Performance Certificate (EPC) Change?

With the UK’s long-term aim to meet net-zero carbon emissions, the focus has turned to EPCs and what we can do as Landlords and homeowners to make properties more energy efficient. This is going to have a big impact on Landlords in the next few years. Currently, landlords are no longer able to let properties which fall below an Energy Performance Certificate rating of F or G. It looks like the minimum EPC for rental property is changing again, as the government has set out intentions to raise the minimum EPC rating further. This means that any new tenancy agreements set up after 2025 will need to have a minimum EPC of C or above. 

As a landlord, if you wish to continue letting your property now and beyond 2025 you may need to carry out essential works to your properties to raise your EPC rating in line with the minimum standards. Sometimes this can be small changes such as energy efficient light bulbs, smart meters, or draught proofing. You may even wish to discuss some of these changes with your tenants as the UK faces ever increasing energy bills and a cost-of-living crisis, tenants may be willing to share some of the cost, due to the benefits they could see in energy savings.  

How Long do EPCs last?

Once you have an Energy Performance Certificate, it will be valid for 10 years.  All EPCs are uploaded onto the government website, if you ever need to check how long your EPC has left or if the rating is currently an E or above. All the information can be found here it even gives you helpful advice on what improvements can be carried out on the property to improve its energy efficiency. 

Currently research shows that four in ten landlords have properties in their portfolio that are rated D or below, with the planned increase in the minimum EPC requirement to a C this equates to 38% of landlords with properties which would require improvements, this raises to 58% of landlords in London. 

If you carry out improvements to your property to raise the EPC rating then you can have a new assessment carried out by a qualified energy assessor, this will be updated on the government website for another 10 years from the date the new report was carried out. 

Exemptions to Energy Performance Certificates

Listed Properties

Due to the vast assortment of housing types that range in age and build types in the UK, its difficult to create a housing policy which can be applied to every property. This has left some properties exempt from the EPC requirements, such as Grade listed properties. Many of the alterations needed to improve an EPC rating are physical alterations such as new windows, doors, or solar panels as an example. Since Grade II listed buildings are subject to regulations preventing them from being unacceptably altered outside of their character and appearance, many Banks will not require an EPC to be in place for this type of property. 

Holiday Rentals

Also, Holiday Let properties which meet specific criteria may not need an EPC either. Since Holiday Lets are not intended for full-time occupation, they often only need to be heated and run for shorter periods of time and during these times the cost of running the property is not paid for by the occupant. To ensure you do not need an EPC on your holiday let you must make sure you meet all of the HMRCs occupancy definitions for a fully furnished property. 

There are only two other conditions you must meet to be exempt from an EPC on a holiday let. 

1. The property must be available for letting as a holiday let for at least 210 days in the year. 
2. The occupant is not responsible for paying the energy bills. 

It’s important you check if you meet all the criteria if you think your property is exempt from an EPC, if you do not have an EPC where it’s required, it may affect your ability to mortgage the property and you could face fines. 

How will the EPC changes affect Buy To Let mortgages?

The majority of the UK’s landlords have mortgages on their rental properties, this means banks are getting stricter on EPCs and will no longer accept properties which fall below the current minimum EPC standards of F, they may even want to see plans for properties to improve their energy rating which are close to the threshold of an EPC rating of E. This means if you are letting a property  and the EPC is below an E or even expired, it may need some improvements to make it more efficient before banks are happy to lend. Despite this, and rent allowing, mortgage lenders do have products available for additional borrowing to help fund these energy performance improvements. 

Lower Rates and Incentives are offered by some lenders

However, this is good news for properties which already have an EPC between A and C, as there are now more high street and specialist banks which recognise this by offering lower rates or incentives to property owners with green mortgages. With such a sharp rise in the cost of living and energy prices growing, more tenants are becoming savvy with energy efficiency. Since most people have smart meters installed it has become much easier for tenants to track where their main costs are. Therefore, tenants are better informed when choosing their rental property. In light of the additional costs of running a home, 58% of renters have said they would be less likely to look at rental properties with an EPC of D or below. 

What will happen if your Buy To Let does not meet the minimum standard?

The current minimum legal EPC requirement for buy to let properties is E and above. If your rental property has an EPC of F or G without a valid exemption, it will not meet the minimum EPC standard required currently and as the Landlord you would be required to make green improvements to the property. Until the EPC is brought up to at least an E you will not be able to take on any new tenants and if the property is currently let and has an EPC below E, you could face fines. 

What can landlords do and how can they fund energy efficient improvements?

There are a wide array of grants and funding schemes available for those looking to upgrade to the new required EPC ratings and most are advised to start as soon as possible, but it certainly will only help and not fund a major part of what is required. 

Some may also feel that changes, where funding currently exists, for example adding an electric vehicle charging port as a little unnecessary and not warranting much immediacy. Often costing about £1000, there is £350 available for this from the Electric Vehicle Homecharge Scheme.

Other funding opportunities worth exploring include ‘The Boiler Upgrade Scheme’ for England and Wales. VAT relief on energy saving materials in England, Scotland and Wales until 2027. A Green Deal loan aimed at funding a variety of home improvements and repaid through your electricity bills. If landlords have qualifying tenants from low income or vulnerable households then the tenants themselves may be able to access Energy Company Obligation Grants to support the implementation of energy efficiency improvements into the home.

Bridging Finance could help to fund improvements

With changes required for many property owners and costs being a major factor, bridging finance can play a key role in providing required funds in the short term. Among its benefits, the flexibility of bridging loans stand out to investors, as a way to leverage their investment at every stage of the property cycle from purchase to refurbishment, all the way through to either selling or exiting to a buy to let. This can be a useful tool to mitigate the impacts of EPC changes, as it provides a quick cash injection to make improvements ahead of the deadline.

With lending in mind, most providers allow for the raising of funds to pay for home improvements on the subject, if not other properties you own. Your broker will need to factor the increased payments and the use of the funds for each lender but if larger amounts are required this may be worth exploring too. 

*[Information on Haringey Housing source]