Proposed Energy Efficiency Ratings for Landlords

Protecting the environment is a big topic at the moment and the Government is working towards it’s climate targets of a net zero society by 2050. As part of this strategy, the Government has introduced its Heating and Buildings Strategy which focuses on properties and their impact on the environment.

The Government has set out plans to ensure that as many homes as possible will have an EPC rating of C or better by 2035 and that those which are deemed to be fuel poor reach this goal by 2030. Clearly the Government wasn’t just looking at privately owned properties and there was a consultation sent out in 2020 looking at changing the legally required EPC ratings for properties in the Private Rented sector to a band C by 2025 for new tenancies and 2028 for all tenancies. We will take a look at this in more detail in this article.

What is an EPC

EPCs have been around since 2007 and stand for “Energy Performance Certificate”. This is a rating which shows how energy efficient a property is from the top score of an A to the worst score of a G. It is a legal requirement that any property being built, sold or rented out needs a current EPC certificate. These are valid for 10 years so any certificate published in the last 10 years would be deemed to be current.

Current Legislation

Under the Domestic Minimum Energy Efficiency standards (MEES) Regulations any property which came under an assured tenancy, regulated tenancy or a domestic agricultural tenancy agreement and was let or modified within the last 10 years, requires an EPC certificate. These regulations also stipulate that since the 1st April 2020 no property could be let with an EPC rating of lower than E unless an exemption was in place.

Proposed Legislation

The Government wants to move as many properties as possible to at least a C rating by 2035 and those worst performers, where there is fuel poverty, to a C rating by 2030. Despite these plans, the Government is proposing to bring this forwards for rental properties and are currently debating the Minimum Energy Performance of Buildings Bill in Parliament. This Bill will require properties in the Private Rented sector to have a minimum EPC rating of C for new tenancies by as early as the end of December 2025. For existing tenancies this would be implemented from 31st December 2028. The bill is now at the second reading stage in Parliament.

Exemptions

There are exemptions to the requirements and these would need to be registered with the local council with supporting documents. The exemptions are:

  • High cost exemption. This is where the cost of implementing the cheapest improvement would exceed £3,500 including VAT
  • 7 year payback exemption. This is where the savings that are likely to be generated by the improvement would not pay back the initial investment within 7 years of implementation.
  • All improvements made exemption. This is where all reasonable improvements have already been made and there are no more that can be made.
  • Wall insulation exemption. This is where the suggested wall insulation improvement is not feasible.
  • Consent exemption. This is where the landlord can show that consent from a relevant 3rd party such as a local council planning office, mortgage lender or the tenant themselves has not been given for the improvements.
  • Devaluation exemption. In this case the landlord must show a report from an RICS registered surveyor that the improvement would devalue the property by more than 5%
  • New Landlord exemption. A 6 month exemption can be granted for new landlords to give them time to make the required improvements or get a valid exemption.

Other than the new landlord exemption, all the others are valid for a period of 5 years.

The main takeaway here is that there is a lot of talk about 2030 and 2035 in terms of requirements to meet a specific EPC rating, which seems a long way away. For private rented properties, however, this is potentially going to be implemented by the end of 2025 so some landlords will need to start making improvements soon to be able to continue to rent out their properties.