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What is the minimum EPC rating for rented property?

minimum EPC rating for rented property

If you are a landlord in England and Wales, it’s important that you know: “What is the minimum EPC rating for rented property”.

There are also new laws for Scotland’s landlords which are discussed later in this article.

Since April 2020, all rental homes in England and Wales have had to meet the Minimum Energy Efficiency Standard (MEES) laid down by the government.

This means that all properties, whether they are bought or rented, will need an Energy Performance Certificate (EPC).

The legislation was first introduced in April 2018 and the standards laid down that each rental property with a new tenancy must have a minimum of an E rating as part of their EPC assessment.

Since many landlords were faced with hefty improvement bills, the government then put a cap on how much the landlord could spend of £3,500 per property when bringing them up to the minimum level.

However, since 1 April 2020, the minimum EPC rating for a rental property was extended to cover all existing tenancies and not just new ones.

The EPC system for rental homes

The EPC system for rental homesHere’s what you will need to know about the EPC system for rental homes.

The first question may be to ask what is an EPC? The simple answer is that this is a certificate that shows how energy efficient a property is currently and how better it could be with improvements.

This EPC rating is based on an assessment that is carried out by an accredited domestic energy assessor.

All of their work is based on the fabric of the building and focuses on the materials and its construction. There’s also an analysis of its ‘services’, such as lighting, ventilation and heating.

The assessor will give points for each of the property’s energy efficient measures that are in place.

This leads to a standard assessment procedure rating, also known as SAP.

It’s this figure that’s converted into the EPC band or rating for the rental property concerned.

Landlords need to understand that the most efficient rating is A and the most of inefficient rating is G.

EPC is a legal requirement for all buildings

While an EPC is a legal requirement for all buildings that are being constructed or sold and also let, landlords with an HMO do not need separate EPCs for individual rooms being let.

However, if the HMO has been sold or let on a single tenancy within the last 10 years, then the landlord’s HMO building will require an EPC.

Who will need to upgrade their rental property?

In England and Wales, the minimum band E rating will apply to all new lets and all current tenancies.

This means a landlord will need to pay up to £3,500 for every property they own to boost the EPC rating if it’s currently F or G. This expenditure is known as the MEES cap.

This then begs the question of what if the cost of improvements to achieve at least an E rating if the final bill will be more than £3,500?

In these cases, the landlord will have to register an exemption, usually as a high cost exemption, because the costs of installing the lowest priced improvements is higher than this.

Alternatively, the ‘all improvements made’ exemption will be used if the landlord has spent up to £3,500 but their rental property still remains as an EPC rating of F or G.

Landlord will need to provide evidence of the exemption they want to fall under when they register and the exemption will be valid for up to five years.

EPC improvement work must be carried

There’s no doubt that under the law, the EPC improvement work must be carried out, but what can you do if your tenant refuses access for this to be done?

Should a tenant refuse access, or if yours is a leasehold property and the freeholder landlord refuses consent, then you can register this as a consent exception. This again will be valid for five years.

However, should your tenant leave the property after they are previously refused access, then any exemption will not be valid. You will then be required to meet the minimum EPC rating before you can legally let the property once more.

For those landlords who have an EPC that has expired, but they haven’t re-let the property since that date, then they will need to meet the minimum energy standards before the property is let.

Further legislation affecting landlords

This can be a confusing issue for landlords and property investors, and since the UK government has pledged to meet a net-zero carbon emissions target by 2050, it’s likely there will be further legislation affecting landlords.

The basic point is that the government is looking to improve housing’s carbon footprint and property experts are predicting that by 2030, rental homes will need to meet a minimum EPC rating of C and by 2050, this could be tightened to become an A rating for rental homes.

And let’s not forget that the government is looking to ban gas boilers from all new-build homes from 2025 and landlords should prepare for gas boilers being phased out from current properties at some point in the near future.

This means that in order to meet their future EPC rating commitments, landlords may need to consider alternatives to gas boilers for heating their homes, including:

  • Renewable energies such as solar panels and wind turbines
  • Ground source heat pumps
  • Biomass boilers

Financial penalties for not meeting minimum EPC requirements

Financial penalties

However, it’s worth taking a close look at the financial penalties for those landlords who do not meet the minimum EPC requirements for their rental property.

Firstly, we’ve mentioned that the landlord or agent who wants to register an exemption must use the private rented sector exemptions register, which is found online.

This exemption will help protect them because they are then able to rent out a ‘substandard property’ because they cannot carry out the work – but they could still face fines because local authorities will be checking that they are being honest.

And the financial penalties for those who fail to comply can be severe. The amount being levied will vary depending on how long the breach was for.

For example, for a landlord who rents out a non-compliant property – that is a rental home that’s been in breach for less than three months – then they could be fined up to 10% of the property’s rateable value to a maximum of £50,000. Or they could face a £5000 fine, whichever is the largest amount.

For those who rent out a non-compliant property for a least three months, they could be fined either £10,000, or 20% of the property’s rateable value to a maximum of £150,000, again, whichever is the larger amount.

Landlords also face the prospect of being fined for providing false or misleading information of up to £5000. This fine also extends to those who fail to comply with any compliance notice they may be given.

The EPC minimum rating for rental properties

Since it’s predicted that the EPC minimum rating for rental properties will switch to C or D by 2022, it is highly recommended that any landlord who needs to improve their property do so by considering what the potential future impact of regulations might be.

There are some simple and cost-effective ways to improve a property’s energy efficiency and they include:

  • Insulating the roof and walls: Since 25% of a home’s heat will disappear through the roof, this could be a sound investment. For those properties with cavity walls, then having insulating material to fill the gap is also a worthwhile expenditure. Of those properties that have solid walls, for example those that are generally built before 1920, then you could be facing a very expensive bill for this work to be carried out, so you may find that you will be exempt under the costs of improvements as explained earlier.
  • Installing double or triple glazing: For older properties, having double or triple glazing will save on heating bills and boost the EPC rating.
  • Introducing low-energy lighting will also reduce bills and this is a very cheap way of improving an EPC rental property score.
  • Replace the boiler: An inefficient boiler may need replacing with a newer, condenser type. This may also be the opportunity to consider biomass boilers that use renewable wood pellets as their fuel type.

Alternatively, EPC scores can be improved by introducing ground source heating pumps or having renewable energy sources, including solar panels and even wind turbines.

The rules for EPCs in Scotland

EPCs in ScotlandWhile we have discussed the minimum EPC requirements for rental properties in England and Wales, for landlords in Scotland, there are new laws that will come into effect.

The new legislation will operate on similar lines but they have been postponed until October 2020 because the Scottish Government has suffered several delays in trying to finalise the regulations.

For those who need to know what the EPC regulations for private rental sector homes in Scotland will be, they need to at least achieve:

  • By 1 October 2020, an EPC rating of E whenever a tenancy changes from that date
  • By 31 March 2022, all rental homes must be offered with an EPC rating of at least E
  • From 1 April 2022, when a tenancy changes the EPC rating must be D
  • By 31 March 2025, all rental properties in Scotland must have an EPC rating of at least D.

While this is not a firm timetable, there may be variations to the dates so Scottish landlords should keep abreast of the latest minimum EPC regulations to ensure they don’t break any laws.

The Scottish government has also introduced various exemptions, including having tenants refusing for the work to be carried out, for properties where it is technically not feasible for improvement works to be carried out and where the property is in a conservation area and the landlord cannot obtain admission for energy improvement work to be done.

Enforcing the energy performance standards

As in England and Wales, local authorities have been tasked with enforcing the energy performance standards in Scotland and also in granting any exemptions. Scottish landlords face fines of up to £5,000 for not complying with the minimum standards and for providing misleading or false information to the exemptions register.

Essentially, finding out what is the minimum EPC rating for rented property in England and Wales, and also in Scotland, is straightforward and the best way of doing it is to contact a landlords’ organisation who will explain what the legislation covers and what investors can do to improve their property so it meets the current laws.

MORE INFORMATION

The Government has published a detailed guide to what landlords and property investors need to understand about the minimum EPC rating for their rental property in England and Wales.

The Scottish government’s EPC guidance can be found on their website.

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