The Government has proposed a new EPC change for landlords requiring a Minimum Energy Efficiency Standard (MEES) to move from E to C. This upcoming change to the EPC requirement could be expensive for landlords and needs careful planning.
What is EPC?
EPC stands for Energy Performance Certificate and measures the energy efficiency of a dwelling. It’s a document that outlines the energy efficiency rating of a property. It provides information on energy usage, costs, and recommendations for improving efficiency. An EPC certificate rates your property from A to G.
Since April 2018, there has been a minimum energy efficiency standard in place for rental properties in the UK. As of September 2021, properties must have a minimum EPC rating of E. This applies to both residential and commercial properties.
All that is about to change. From 2025 it will be unlawful to let out your property which has a lower rating than grade C to new tenants. Likely, you will not be let out of your property at all.
As a nation, we are committed to our net-zero target, which is driving the EPC changes for landlords. But a better EPC rating also means lower energy bills, and this makes your property more attractive to future renters.
When are the upcoming EPC changes for landlords taking place?
The announcements of these changes have been another nail in the coffin for many landlords. Conditions have been tough over the last few years.
As it is many landlords are leaving the market due to:
- higher borrowing costs
- restrictions to mortgage tax relief for higher-rate taxpayers
- Making Tax Digital (MTD) and the burden of more administration.
But for others, property investment income has been part of the bigger picture, especially for planning for retirement.
The changes to minimum EPC ratings are going to be phased in from 2025 to 2028 so you have time to plan.
How will the new EPC changes impact landlords?
The main point you need to know is that the minimum EPC rating for all properties is changing from E to C. If you don’t know the rating of your property as it is now you need to find out.
From 2025 you will need to provide an EPC certificate to any prospective tenant showing a rating of C or above. This rating must then be maintained. You will not be able to advertise your property without the new rating.
For an existing tenancy, you will have until 2028 to upgrade your property if needed. But what if the existing tenant leaves say 2026 after serving notice? It is better not to wait until 2028 but instead start your research now.
There is a cap to the costs you are expected to incur. Full details can be found here
There are penalties up to £30,000 for each property if you don’t meet this minimum criterion so don’t treat this matter lightly.
How can a landlord improve the EPC rating quickly and simply?
To improve your rating you can expect to spend some money on a variety of things. Houses and in particular semi-detached and detached houses could have more issues than flats.
There are some quick easy steps you can take to make the improvements. You should look at each of these areas and ascertain when and how you will do the work. Many of these steps you may already have taken recently.
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Install a smart meter
Most energy suppliers are offering free meters. This way you can ask the tenant to measure the energy consumption in the property.
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Energy-efficient lighting
Older style light bulbs and lights are really bad from an energy efficiency point of view. So, you need to change these to the LED versions.
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Improve insulation
Insulation is a simple way of improving energy efficiency. You can look at the insulation in the loft, extra insulation in the walls, floors, etc.
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Improving windows
You can upgrade your windows to be at least double-glazed or maybe even triple-glazed. It’s a great selling point.
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Install a new boiler
As you may well know the government wants us to get rid of our older boilers and put in heat pumps or more energy-efficient boilers. If your boiler is more than 10-12 years old do some research into the newer energy-efficient ones.
Please note some of the expenses may not qualify under repairs for tax purposes so planning is important.
Next Steps
- If you have an agent speak to them as soon as you can. You need to find out the EPC rating for each of your properties. If you don’t have an agent, you will need to do this yourself.
- It would be prudent to use the time you have to put in some affordable plans. We are here to discuss any issues you may have and draw up a budget to make the improvements.
- It is better to do the work in stages and spread the cost. You may need funding to carry out the works identified and again we can discuss this with you and get you the best options.
- Myers Clark offers full support for
- landlords so get in touch if you need help.
- https://www.myersclark.co.uk/landlord-tax-support