Winter Warmer For Landlords – Cost Of Improving EPC Rating Capped!.
Welcome news for landlords who feel under increasing, undue pressure from government legislation to improve conditions for their tenants or face stiff financial penalties. It was recently announced that landlords will now not be expected to pay up to £5,000 for improving a rental property possessing the lowest energy performance rating bands of F or G.
As autumn is replaced by winter and temperatures start to fall, it’s only to be expected that home thermostats will be turned up. The cost of the winter heating bill will of course, depend on a number of factors, not least, a property’s energy efficiency. The problems of inadequate heating in the average house or flat to rent can often come disastrously to light as the mercury dips, and landlords are urgently called upon to address issues raised by tenants.
The key areas of a property included in assessment ratings of the Energy Performance Certificate (EPC) include the walls, roof and floor, windows, main heating and controls, secondary heating, hot water and lighting.
Banned from letting to new or existing tenants
Since 1st April 2018, when the Minimum Energy Efficiency Standard (MEES) was introduced, landlords were banned from letting to new or existing tenants, any private rental property with an Energy Performance Certificate (EPC) rated below Band E. The energy efficiency of a property in England and Wales is graded in bands from A to G with an average energy efficiency rating of EPC Band D.
Then in a further move on the private rented sector, in July 2019, the Business, Energy and Industrial Strategy Committee published it’s latest recommendations, including the introduction of Minimum Energy Efficiency Standards regulations, which required landlords to contribute up to £3,500 towards domestic energy efficiency improvements.
An estimated 400,000 properties fall within EPC Bands F or G, which could mean around 10 per cent of housing stock in England and Wales would fail to meet the new energy performance standards. Consequently, landlords were required to carry out work to improve the energy performance of a low rated property or face penalties of up to £4,000.
Up to 30 per cent fewer ‘void’ periods
The government ran a consultation on amending the Minimum Energy Efficiency Standard Regulations from December 2017 to March 2018, in which a landlord’s contribution to energy performance improvement would be capped at £2,500 per property. However, after further analysis, it was concluded that retaining the present cap of £3,500 would aim at a significant improvement to EPC Band F and G band properties in the private rented sector, while “protecting landlords from excessive costs”.
Landlords can see further key benefits from creating and maintaining an energy-efficient property, not least, in seeing up 30 per cent fewer ‘void’ periods and potentially increasing its market value.
Revised analysis suggest that a cap of £3,500 would enable nearly half (48 per cent) of EPC Band F and G properties to be improved to EPC Band level E – up from a third (32 per cent) originally indicated. The remaining half (52 per cent) are expected to also achieve a level of improvement despite failing to reach the required minimum of EPC Band E. It’s calculated that the average cost of improving an EPC Band F or G rated private rental property to EPC Band E is likely to be around £1,200, while the average cost for rentals making “best possible progress” towards achieving EPC Band E is estimated to be £2,000.
Applies to all privately rented property from 1st April 2020
However, landlords should be aware that the April 2018 legislation is still set to be introduced in separate stages. This means that while it is now prohibited to grant new leases to residential (or commercial property) with only a current EPC band rating of F and G, the regulation will also apply to all privately rented residential property required to have an EPC from 1st April 2020. The same rule will also apply to all existing commercial leases in April 2023.
Many landlords may still be unsure of the current energy efficiency ratings of their rental properties. An experienced property management agency should be able to correctly advise on improvements that need to be made which will significantly raise EPC performance ratings.
