Energy Performance Certificates (EPCs) play a crucial role in the drive to reduce carbon emissions and promote energy efficiency in residential properties across England and Wales.
In 2019, the UK government set an ambitious target to achieve net zero greenhouse gasses by 2050. According to its own statistics, homes are responsible for about 15 per cent of the UK’s greenhouse gases.
As part of ongoing efforts to improve energy efficiency within the rental market in England and Wales, the government has proposed changes to EPC regulations to come into effect in 2025.
Landlords and tenants should make sure they are aware of the amendments, and how they will be affected, well in advance of then so they can plan and prepare.
In this article, we explain what Energy Performance Certificates and Minimum Energy Efficiency Standards are.
We’ll also provide an overview of the planned changes, and how we expect them to impact landlords and tenants.
What are EPC regulations?
EPC stands for Energy Performance Certificate. All rental properties in England and Wales are required by law to have a valid one.
EPC Regulations were introduced by the European Union in 2002 to help reduce carbon emissions.
The EPC is a document that tells homeowners, landlords, and tenants what a property’s energy performance grade is and provides important information about its energy efficiency.
The energy performance grading scale runs from A-G, with a grade of A being the most efficient and G the least. The certificate also provides recommendations for how the property could be made more energy efficient to improve comfort, cut carbon emissions, and reduce the cost of energy bills.
An EPC is valid for 10 years.
To get an EPC, landlords must arrange for an Energy Efficiency Survey to be carried out by a Domestic Energy Assessor who is on the EPC Register. An assessor visits the property and inspects the property’s interior and exterior to determine its energy efficiency rating.
Some areas of the property that are assessed include the windows, roof, walls, insulation, boilers and heating systems, and fireplaces.
A building’s dimensions and age are also taken into consideration when grading a property’s energy performance.
What are the existing EPC requirements?
The current Minimum Energy Efficiency Standards (MEES) for domestic properties have been in place since April 2020.
According to government guidance, landlords cannot let a property with an EPC rating that is below an E.
Landlords with properties that have been given an EPC rating of F or G must improve the property’s rating to an E, or apply for an exemption, before they can enter into a new tenancy agreement.
Landlords that fail to comply with MEES and EPC requirements can face fines of up to £5,000.
How are EPC requirements changing?
In December 2020, the same year that the existing MEES were put into place, the government announced plans to increase the minimum rating once again in 2025.
According to the government document Improving the Energy Performance of Privately Rented Homes in England and Wales, the MEES for residential properties will increase in 2025 from a minimum EPC rating of E to a minimum rating of C for all new tenancies.
Under current government proposals, this new minimum rating will also apply to all continuing tenancies from the year 2028.
Under the new rules, landlords that fail to comply with the new EPC requirements will receive harsher penalties.
By 2028, the amount landlords could be fined for non-compliance will increase from a maximum of £5,000 to a maximum of £30,000.
How will the changes to EPC requirements affect landlords?
The proposed changes to EPC requirements will enforce higher standards on landlords and require many landlords to make significant changes to their rental properties.
How will landlords benefit from the changes to EPC requirements?
Improving the energy efficiency of their rental properties will help landlords to provide tenants with more comfortable properties to live in, improving tenant satisfaction, and their reputation as a landlord.
While improving energy performance is ethically the right thing to do, landlords may also find that they benefit financially from improving the energy efficiency of their rental properties.
Making the improvements will help landlords to increase the value of their property, allowing them to charge more in rent and reducing void periods.
How much will the changes to EPC requirements cost landlords?
While there are undoubtedly benefits to be had from improving a property’s energy performance, there may also be significant costs involved with bringing it up to the required standards.
These costs will vary from one property to another as the level of work required will depend on several factors, including the age of the property and its existing Energy Performance Grade.
Some older properties, in particular, could prove to be particularly expensive to update and bring up to modern energy efficiency standards.
Indeed, research by the English Housing Survey estimates that 18 per cent of the private property rental market would require more than a £10,000 investment to bring it up to an EPC rating of C.
Under the current proposal, the cost cap for the new 2025 EPC requirements stands at £10,000, at which point landlords will be able to apply for a high-cost exemption.
What happens with existing tenancies when the new regulations come into effect?
Once the new rules come into effect in 2025, landlords with properties that are rated E or above will be able to legally continue with any existing tenancies up until 2028.
When this tenancy comes to an end, they will not be able to let the property again until they have improved their EPC rating to the required standard.
We recommend that any landlords with properties that do not have an energy efficiency grade of C or above start planning now to improve their EPC grade.
How will the changes to EPC requirements affect tenants?
While tenants are likely to be affected to a lesser extent than landlords, they are also likely to see some changes in the rental market.
How will changes to the EPC requirements benefit tenants?
The stricter energy efficiency rules in the privately rented sector will be beneficial to tenants as they will enforce higher standards on landlords.
Properties with higher energy performance ratings are warmer and more comfortable homes to live in which is beneficial to tenant health, wellbeing, and overall satisfaction with where they are living.
At a time when the cost of energy is high, making improvements to a property’s energy efficiency could also benefit tenants by reducing the cost of their energy bills.
Will there be any disadvantages to the changes to EPC requirements for tenants?
With such a high number of landlords currently managing rental properties with EPC ratings that fall below a C grade, there is a risk that some landlords will sell their properties rather than invest in making the improvements.
If this were to happen, there could be a further shortage of rental properties, which would drive the cost of renting up higher for tenants.
Here at Mistoria Estate Agents, we recommend that landlords familiarise themselves with the proposed changes to EPC requirements well in advance of 2025 to give themselves plenty of time to plan and prepare for the changes.
This will help them to minimise disruption and financial loss if their property requires any renovations to bring it in line with the new requirements.