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What is the minimum EPC rating for rental properties?

It’s only a few months until the MEES (Minimum Energy Efficiency Standards) legislation will be enhanced and strengthened to include all rental properties, not just new tenancies, which means it’s a great time to remind landlords what you need to look out for, tips on how to improve your Energy Performance Certificate rating and how to avoid falling foul of government penalties. 

What is changing?

On April 1 2018, a major new piece of legislation came into force in an attempt to improve the energy efficiency of homes in the PRS. MEES made it mandatory for all rental properties being let out as new tenancies, or the renewal of existing tenancies, to have an EPC rating of E- or above.

From April 1 2020, this will apply to all existing tenancies, no matter when they started, which means it will be unlawful to rent out a home which falls below the required standards unless there is an applicable exemption.

Landlords who don’t adhere to the rules could face a civil penalty of up to £5,000 for non-compliance, with the potential fine varying depending on the length of the breach. Tenants can raise a case with the First-Tier Tribunal General Regulatory Chamber if they feel their landlord is breaching the legislation.

Put simply, the vast majority of landlords will be breaking the law if they continue to rent out a property with an EPC rating of F- or G- after April 1 2020.  

How many properties are potentially affected?

It’s been previously stated that the PRS has the largest proportion of the most energy inefficient homes (with 6.3% F- and G- rated properties, compared to around 0.7% of social housing).

During 2019, according to the Residential Landlords Association (RLA), around 290,000 rental properties with an F- or G- rating needed to be improved by landlords before they could be put on the market for new tenancies, at an average cost of £1,200. This represented around 6% of the overall domestic market, a considerable fall from the mid-90s and a slight fall from a few years ago.  RLA Policy Director David Smith has previously stated that ‘the proportion of private rented homes with the worst energy efficiency ratings of F- or G- has fallen from 39% in 1996 to 7% in 2016’.

Government figures, meanwhile, have previously stated that there could be up to 285,000 properties in need of urgent work.  Most landlords will be unaffected by the changes as their properties are already compliant, but there is still likely to be a small portion of rental homes which don’t meet the required standards, especially older and period properties which weren’t designed with energy efficiency in mind

What are the exemptions?

As a landlord, you must comply with the strengthened MEES regulations regarding existing tenancies, unless you can rely on one of a few exemptions available to landlords. This includes but is not limited to:

  • Exemption due to devaluation – a temporary exemption of five years will apply if a landlord can demonstrate that the installation of energy efficiency measures would reduce the market value of the property by more than 5%.
  • Exemption for new landlords – if a person becomes a landlord recently or suddenly in specified circumstances under the MEES Regulations, a temporary exemption of six months will apply.
  • Third party consent – if a landlord cannot obtain necessary third party consents to improve the EPC rating of the property (including but not limited to lender consent, superior landlord consent and/or tenant consent), then a landlord may let a ‘sub-standard’ property. 

 A landlord, or a letting agent on their behalf, wishing to apply for an exemption must register it on the Online Private Rented Sector Exemptions Register.

Local authorities give and keep fines for non-compliance, so are incentivised to enforce the legislation. This means any landlord thinking of trying to skirt around the rules should think again.

Five top tips to making a rental home more energy efficient 

If you need to bring your rental home up to the required standard, or just want to further enhance your EPC rating to appeal to eco-conscious tenants and be prepared for a possible rise in the new minimum requirement to C- or D- by 2022, there are a number of quick and simple steps you can take.

It’s also important to bear in mind that it could work out to be more cost-effective to carry out a whole house retrofit, tackling insulation, windows and heating systems in one go, to bring a property up to a higher EPC rating, rather than carrying out a series of smaller upgrades.

Here are five easy ways you can improve your property’s EPC.

1. Upgrade your lighting to LED light bulbs

If your EPC rating is right on the margins, and it won’t take much to lift it up one or two ratings, switching to LED light bulbs – which are much more energy-efficient and eco-friendly – could make all the difference.

One easy way to improve energy efficiency is to replace old halogen or incandescent light bulbs with light-emitting diodes (LEDs).

LEDs have become increasingly popular in recent years due to their combination of efficiency and long-term savings on energy bills, and provide a quick and relatively inexpensive way to improve the EPC rating.

2.  Insulate the walls and roof

One of the most popular and effective energy efficiency measures, and likely to cost you less than alternative improvements, new insulation can be a particularly efficient way of improving your score, especially if the insulation was poor or lacking before. Increasing insulation in the loft to at least 270mm thick will have a significant impact on how much energy escapes through the roof.  An uninsulated roof typically lose up to 33% of heat through the roof!

Wall insulation, whether cavity wall (for more modern properties, built with a gap in between two layers of brick) or solid wall insulation – typically for older properties (pre 1920) with solid brick walls can be a very effective way of improving a property’s energy rating.  However the costs vary significantly.   Cavity Wall insulation on average could cost from £370 - £500 to install for a typical semi-detached property making it an easy, simple and relatively cheap step to take, and could have a big impact on your overall EPC rating.

Solid wall insulation, both internal and external, however is considerably more expensive, but will lead to larger savings on heating bills.  With estimates from £8,000 - £22,000 for external and £3,500 to £14,500 for internal wall insulation, it’s not a cheap option, and you may want to consider alternatives such as;

3.    Invest in double or triple glazed windows

There is no point investing in the latest heating and insulation technologies if you neglect the property’s windows.  While having double glazing doesn’t have as much of an impact on the EPC as wall or loft insulation, it reduces the amount of heat lost through the windows.

Most homes in this day and age will have double glazing – and a property without double glazing will be less likely to reach the required efficiency rating, but this might not be the case for older properties. New double glazing could help to boost your property’s EPC score by five to ten points, and the cost is likely to be in the region of £2,000-£5,000 for a typical terraced property.

Triple glazing is a more drastic step, but is becoming more popular and mainstream and can make it much more difficult for heat to escape from your home. However, these will likely be even more costly – for only a small improvement in your EPC rating.

4. Install a more efficient boiler

Heating systems are the cornerstone of a property’s EPC rating. Depending on the age of the existing boiler, switching to a newer, condensing model can significantly improve your rating.

One of the major drags on a home’s energy efficiency is typically an inefficient boiler, whereas as a very efficient one could have a huge impact on your EPC score – increasing it by as much as 40 points. With the minimum threshold for an EPC rating standing at 39, this could get you to the required standard in one fell swoop.

It’s likely to set you back between £1,000 and £3,000, but this outlay could be paid back in spades by making your home significantly more energy efficient.

Pairing this upgrade with smart heating technologies such as intelligent thermostats and connected radiator controls will also allow tenants to save on their heating bills and improve your rating;

5. Install a smart meter

Although the Government has failed in its goal to get a smart meter in every UK home by 2020, and there are certain issues involved with them, they are a good way of telling your tenants how much energy they are using and modifying their behaviours accordingly to become less wasteful and reduce their energy bills.

The above are just some of the steps you can take to improve your home’s EPC rating. With the minimum threshold likely to rise again to C- or D- in the next few years, it’s wise to take action now even if your home is already at E- or above.

If your rental properties are F- or G- rated, it’s vital that you improve this before April 1 2020 otherwise you could face penalties.

Help is available

You may be able to get help for energy-saving improvements to your property under the Affordable Warmth Initiative if your tenants claim certain benefits such as Child Tax Credit, Working Tax Credit, Universal Credit (and others).  You may be able to get help with the cost of insulation work and replacing or repairing the boiler for example.  Visit the Government’s website here to find out more.

Consider investing in renewable energy

If you are looking for a long-term solution that will seriously improve the EPC of your property, it is worth considering renewable energy sources such as solar panels or ground-source heat pumps.

While these alterations carry more initial expenditure, they are often incentivised by government-backed funding schemes and bring with them significant improvements in both the EPC rating and on-going maintenance costs.