EPC rating changes for rented properties - guidance for landlords
In April 2018, legislative changes came into force making it unlawful to let or renew tenancies for residential or
commercial properties that have an EPC rating of F or G.
From 1 April 2020, this will be extended to apply to all
existing residential tenancies. Property expert Kate Faulkner reveals what you need to know about energy efficiency
standards and shares her tips for increasing the rating of your rental property.
- Why is it important to have an energy efficient property?
- What is an EPC?
- Energy efficiency standards since 1 April 2018
- Does every rented property have to have an energy efficiency (EPC) rating of E or above?
- Energy efficiency improvements you can make
- Penalties for non-compliance
- What help is there for landlords?
Why is it important to have an energy efficient property?
The more energy efficient a rental property, the cheaper your tenants' utility bills and the more likely they are to be able to afford the rent. So even if your property meets the new Minimum Energy Efficiency Standard, it's always worth seeing what you could do to improve your rating.
The government are aiming to improve ratings in the private rented sector in England to a 'D' rating by 2025, and a 'C' rating by 2030. If you're making any changes to your property, if you can, it is worth working out if it's easier and cheaper to improve to these levels now.
What is an EPC?
The EPC - Energy Performance Certificate - is a document that confirms the energy efficiency rating of a property. To obtain a certificate, a Domestic Energy Assessor will need to take a look at your property and review various aspects, including:
- the size and type of construction
- the heating system - how it's controlled and the type of boiler you have
- existing wall and loft/roof insulation - how it compares with current standards
- any alternative heating and energy-efficient products in place
- double glazing - windows and doors
Using this information, the Domestic Energy Assessor will calculate the property's energy efficiency and grade it on a scale from A to G, with A being the most efficient. The certificate shows both the current level of efficiency and the grade that could be achieved if improvements were made.
In October 2008, legislation came into force requiring every property to have an EPC before being marketed for sale or rent, with the certificate being made available to prospective tenants and a copy given to the tenant when they move in.
The certificate is valid for 10 years, so don't forget to check when yours needs to be renewed. If you're not sure where the certificate is filed, you can check the EPC register for free.
Since 9 January 2013, it has also been a legal requirement for all advertisements for rental properties to clearly show the energy rating. This allows tenants to see which properties are likely to be more energy efficient and will therefore incur lower heating bills. If you have a property which has a D rating or higher, always let the tenant know during viewings. This is the average rating, so if yours is better it means your tenants' energy bills are likely to be lower.
Energy efficiency standards since 1 April 2018
The Minimum Energy Efficiency Standards require rented properties to have an EPC rating of E or above.
The regulations have been introduced to ensure tenants are able to enjoy a better living environment and lower heating bills. Properties rated F and G waste energy, which imposes an unnecessary extra cost on tenants and contributes to avoidable greenhouse gas emissions.
Since 1 April 2018, landlords have not been able to let or renew the tenancy on a property rated F or G on the EPC. As of 1 April 2020, that will be extended to all existing residential tenancies. That means if a current tenancy began before 1 April 2018 and the property is not yet rated E or above, you need to make improvements, even if that results in some disruption to the tenant.
In 2017, the government estimated that one in ten rented properties had an energy efficiency rating of F or G. While many of these will already have been upgraded, if your property is still at that lower end of the rating system, read our recommendations below for the best energy efficiency improvements you can make.
Does every rented property have to have an energy efficiency (EPC) rating of E or above?
No, there are some exclusions and exemptions, although the reality is that most properties let within the private rented sector will be required to comply.
Under certain circumstances, the landlord may qualify for an exemption, which must be registered on the Public Exemptions Register. Examples of possible exemptions include:
- If a sitting tenant refuses to give consent for improvement works to be carried out.
- If carrying out the necessary works would devalue the property by more than 5%.
- If carrying out the necessary works would cost you, personally, more than £3,500.
The requirement to comply only extends to 'appropriate, permissible and cost-effective' improvements.
Some domestic buildings are excluded from the scope of the requirements, including:
- Residential buildings intended to be used for less than 4 months a year.
- Temporary buildings with a planned timed use of 2 years or less.
- 'Stand alone' buildings with a total usable floor area of less than 50 sq. metres.
- Certain protected or listed buildings and monuments.
If a property does not have an EPC or the EPC has expired without there being a further trigger requiring one to be obtained, then the property will fall outside the scope of the regulations.
For full information on exempt properties, see Chapter 4 of the government's guidance document for private rented sector landlords.
Energy efficiency improvements you can make
Here are the top 5 ways you can improve the EPC rating of your property:
1. Insulate the loft or roof
Much of a building's heating can be easily lost if the roof space is not properly insulated to the recommended thickness of 270mm. So check the thickness of your loft insulation, and install or increase, if necessary.
The cost for a three-bedroom, semi-detached house that currently has no loft insulation is around £300 (£240 for a 'top up'), although you can significantly reduce this by buying and fitting the insulation yourself. If your loft is used as living space, you will need to insulate the pitched roof itself, which is not as straightforward, so it's advisable to employ a professional fitter.
2. Insulate the walls
The property's heat can also escape through the walls, if not properly insulated. For most properties, cavity wall insulation is injected from outside into the space between the inner and outer brickwork.
The insulation needs to be professionally installed and will cost around £475 for a three-bedroom, semi-detached property (around £100 less for a mid-terrace). If the property has solid walls, take professional advice, as the cost of insulating will run to thousands of pounds - possibly more than £10,000 for larger houses.
3. Exclude draughts
It's a good idea to inspect your property, so that you can locate, and deal with, any unwanted gaps where air can escape. These may seem like small changes, but they can make a real difference. You should check the following places:
- Under doors - you can fit a simple brush strip at the bottom of the door for just a few pounds.
- Around windows - if you can afford to install double glazing, this is by far the best option, which should also increase the value of your property. If that's not within your budget, there are other options, such as using foam.
- Via the letterbox opening - fit a plate to stop cold air coming in. Again, these cost very little.
- Keyholes - fit metal discs that cover the keyhole and slide easily to the side when you put the key in.
- Fireplaces - if the fireplace is not used, you can fit a chimney draught excluder yourself or have a professional cap the chimney pot.
The caveat is that all properties need ventilation to allow some air to circulate, particularly in rooms where moisture is produced, such as bathrooms and kitchens, so don't seal these windows. Instead, you can put seals on the internal doors to prevent warm air escaping from the rest of the house via these rooms.
4. Upgrade the boiler
Maintaining an older model boiler can often be expensive. According to the Energy Savings Trust, you could reduce your bills by over £100 a year if you purchase a new one. A new boiler also has the benefit of coming with guarantees and warranties, so can save you money in the first few years on maintenance.
Speak to a plumber who is Gas Safe registered and experienced in fitting boilers in rented properties. Some are landlords themselves and keep up to date with the latest laws, so will be able to advise you on the most appropriate boiler for the number of tenants.
5. Put in low-energy lighting
Installing low-energy LED or CFL lighting is a quick and easy way to make a saving on electricity bills. And there's no need to worry about rooms being too dim for your tenants - technology has come a long way in recent years!
The government's cost cap
The government has imposed a personal spending cap of £3,500 for the cost of improvements, meaning you will never be forced to spend more than £3,500 of your own money on ensuring a property has an energy efficiency rating of E or above.
In many cases, improvements will cost less, and you may be able to get some third-party funding (see 'What help is there for landlords?' below), which could be particularly helpful if your property requires more major works. This would not count towards the cap of £3,500, which only applies to your personal spend.
In calculating the overall cost, you can count any energy efficiency investment made to your property since 1 October 2017.
If installing measures to improve your property to an EPC rating of E would cost more than £3,500 of your own money, then you should simply do as much as is possible for up to £3,500 and then register an exemption.
This is a cap for the requirement to comply, not a target or a spend requirement, so you may spend more if you wish.
Penalties for non-compliance
If your buy-to-let property doesn't comply with the new regulations, the consequences could be severe. Your local authority can impose various penalties, including:
- Where regulations have been breached for 3 months or more - a financial penalty of up to £4,000.
- Where false or misleading information has been entered on the PRS Exemptions Register - a financial penalty of up to £1,000.
- Where a landlord has failed to comply with a compliance notice - a financial penalty of up to £2,000.
On top of that, you could lose a significant amount of rental income for the period of time that your property is legally unlettable.
What help is there for landlords?
Although the 'green deal' was withdrawn in 2015, there are still some government grants available to either part or fully fund loft and wall insulation.
You can use the government's online energy grants calculator to find out whether you are eligible for help. You can also call the Energy Saving Advice Service on 0300 123 1234 for advice and information about what's available in your area and whether you would qualify for any financial assistance.
Your tenant may also be eligible for an insulation grant, so it's worth enquiring and coming to an agreement about paying any balance due. It's important to remember that your tenant cannot instruct any improvement works without your written permission.
For landlords in Scotland, there are various loan schemes available - see the Energy Saving Trust website for more details.
If you don't currently have an EPC or need a new assessment, you can search for a local energy assessor on the Department for Communities and Local Government website. Alternatively, your agent may be able to do this for you, but do shop around as EPCs can be quite competitively priced.
Visit our landlord hub for more tips on letting your property.