The UK has a commitment to do what it can to reduce climate change by meeting Net Zero Carbon targets. This, as well as the rising energy bills that we’re seeing worldwide, means that the energy efficiency of homes is becoming increasingly important.
One area seeing a tightening of regulations is the EPC (Energy Performance Certificate) rating. EPC ratings act as an indication of the energy efficiency of a property, taking into account its construction and any energy-efficiency measures that have been installed. For example, cavity wall insulation, solar panels, or new heating systems.
The current requirement for rented properties is to have an energy rating of band E (where A is the most energy efficient and G is the least). This rule is set to change in 2025 to a minimum requirement of band C for new tenancies, and in 2028 for existing tenancies.
What are the EPC challenges for landlords?
EPC regulations have created several challenges for landlords. If properties don’t meet the minimum band E requirement, landlords are required to fund energy-saving measures to increase the banding. Furthermore, the bar is set to go even higher when the required energy efficiency rating rises.
When an EPC is carried out, a qualified assessor will look at the property, give it an energy efficiency rating, and give a list of recommendations to improve the building’s energy efficiency. These may include:
- Cavity wall insulation
- Loft insulation
- Floor insulation
- Double glazing
- New boiler and heating systems
- Renewable energy measures such as solar panels
At present, there is a cap on the amount that landlords should spend on energy efficiency upgrades to their properties of £3,500. This means that the maximum amount that they are obliged to spend in order to get the property up to a band E is £3,500. If you have not reached a band E after having spent this much, they can continue to lease the property.
When the regulations change in 2025, the minimum amount will also change to £10,000. However, there are options to help landlords fund EPC improvements.
How can landlords fund EPC improvements?
It’s estimated that it could cost an average of £10,560 for a landlord to bring their property up to a band C in 2025. This is a significant amount of money for many landlords. The government have outlined different ways that this can be funded:
- Third-party funding – there are some occasions when third-party funding can be secured. This could be through the Energy Company Obligation (ECO), local authority grants, or Green Deal finance. Furthermore, if a landlord is able to secure this funding, the cap does not apply, and they can spend as much money as they need to to get the property up to the right level
- Third-party funding and self-funding – sometimes landlords can use a combination of third-party funding (less than £3,500) which is topped up by themselves to the value of the cost cap
If a landlord can’t make all of the improvements that are needed on the property for £3,500 (or £10,000 from 2025), they can make the improvements that they can within the limit and apply for an exemption.