An Energy Performance Certificate (EPC) states how energy efficient a property is by using a rating system, which starts at A (the most efficient) and runs down to G (the least efficient). All landlords must have a valid EPC when renting out property to tenants.
EPCs cost between £60 and £120. They estimate energy costs (an important factor for your tenants) and assess the property’s energy performance-related features. An EPC also includes recommendations on how to make your property more energy-efficient and gives an estimate on how much these changes cost. Recommendations could include adding insulation or simple things like changing your lightbulbs to energy-saving ones.
Changes to EPC requirements are part of the government’s work towards its goal of net-zero carbon emissions by 2050. Homes need to run efficiently, and with the current cost of living crisis this has never been more important. EPC requirements for landlords are set to change in 2025 and then again in 2030. These changes will significantly raise the efficiency standards required by landlords. Get informed now so you’re prepared for the changes to come.
EPC requirements for landlords
October 2008 marked the start of landlords’ EPC obligations in England and Wales. From this date every rental property had to have an EPC, although there were no minimum ratings expected.
How an EPC assessment is done
To work out the property’s EPC rating, an assessor visits it to take photos and measurements. They’ll look at:
● Lighting and energy efficient light bulbs
● The age and size of the property
● Any loft insulation or cavity wall insulation
● How the property’s heated
● The windows and whether they’re double-glazed etc.
On 1 st April 2018, the Minimum Energy Efficiency Standards (MEES) were put into place. The introduction of MEES meant that any property being let or sold from this point onwards had to have a minimum EPC rating of E. 1 st April 2020 saw yet another change. From this date, the minimum rating of E applied to all tenancies, including existing ones. This change made it against the law for you to have an active tenancy in any property that has an efficiency rating below E.
Near-future EPC for rental property requirements
The government has now proposed further changes to the MEES for rental properties. These will come into force in 2025 and will change the minimum EPC for rental property from E, to C.
This means that in 2025, landlords starting a new tenancy in a property with an EPC rating below C will be breaking the law. As with previous changes to EPC requirements for landlords, it’s a phased approach.
In 2025, it will apply to any new tenancies, but not to existing ones. However, in 2028 it will change again, and from this point forward it will include all tenancies.
● 2025: EPC rating C required for new tenancies only
● 2028: EPC rating C required for ALL tenancies
Landlords renting out commercial property have been given an even more ambitious target to reach. By 2030, the government wants to change the MEES for non-domestic rentals to rating B.
This change is staggered, with a milestone of rating C expected by 2027. There are two compliance windows set out for landlords:
Compliance window 1 (2025 and 2027) – reach EPC rating C
● 1 st April 2025 – present a valid EPC
● 1 st April 2027 – the property’s EPC must have improved to rating C or above
Compliance window 2 (2028-2030) – reach EPC rating B
● 1 st April 2028 – present a valid EPC
● 1 st April 2030 – the property’s EPC must have improved to rating B or above
How to prepare for changes to landlord EPC obligations
It’s important to prepare for the EPC changes now because the jump from rating E to C is quite something.
If you don’t already know the EPC rating for your property, then find this out first. If your rating falls below C, then read the How to improve this property's energy performance section of the certificate. This section makes recommendations for improvements and indicates how much specific works would improve your rating. It also provides an estimate of how much the work would cost so you can quickly figure out if it’s affordable or not.
It's also worth getting your own quotes for the recommended works as these are likely to be much more detailed and accurate. Whilst you’re getting these quotes, find out how long the improvements will take to complete, so you can factor this in and make sure you can meet the 2025 deadline. You’ll also need to find out whether it’s safe for your tenants to occupy the building whilst the works are taking place. Put together a budget and plan for these potential costs – work out if you have enough contingency in place to cover the works, and/or enough time to save up for them.
Buying and selling property now
If you want to buy more properties to rent out then make sure you pay close attention to the property’s current EPC rating. This is a strong indication as to whether the property’s a good investment or not. If you do buy the property, work out your mortgage costs alongside any energy efficiency improvement costs you’ll have to pay for down the line to see whether you can afford it.
If you currently own a rental property and you don’t think it will ever meet the new EPC landlord requirements, then it’s worth considering whether you should sell it now. Whilst this may sound extreme, it’s going to get much harder to sell or even let properties with poor EPC ratings in the future.
Listed or protected properties tend to be exempt from EPC requirements because the work needed to bring them up to standard would drastically change them. There are other exempt buildings, such as places of worship, holiday properties (that are rented out for less than four months a year) and temporary buildings.
Landlord investment to meet EPC ratings
With the current regulations, there’s a cap on how much the government expects you to spend on energy efficiency improvement works. Landlords are expected to invest a maximum of £3,500 on works to help their property reach level E. If you can’t reach level E by spending £3,500, then you can apply for an exemption.
However, this spending limit is likely to change. The government realises that the jump to level C is going to be much harder and more expensive, so it wants to increase the spending cap for landlords to £10,000. This is a large amount of money and puts a lot more pressure on landlords to come up with it quickly.
There may be energy efficiency grants available, so it’s worth keeping an eye out for any further announcements about these.
Where to start with energy efficient improvements
The government has recommended a “fabric first” approach, and this means that you should start improving your EPC rating by insulating your properties. Wall, loft and floor insulation can drastically reduce the need for heating by retaining heat within the property. This will go a long way to reduce energy costs for your tenants, which will make your property more attractive to them.
Renewing a property EPC Currently
EPCs are valid for ten years, and you’re not required to get a new one for an ongoing tenancy. However, if you wish to sell your property or rent it to a new tenant, then you need to get a new EPC.
What happens if I don’t have an EPC as a landlord?
All tenants must be provided with a copy of the property’s EPC when they move in; it’s illegal to let out your property without a valid EPC.
Currently, you can be fined £5,000 if you’re caught renting out a property without an EPC. However, following the changes in 2025, the fine for not having an EPC for your rental property will rise significantly to £30,000.
The expected changes to landlords EPC obligations in 2025 are a big ask so it’s important to start preparing for them now. Make sure you know the rating your property currently has so you know how much work is needed to get it to rating C (if it’s not there already). There may be further announcements about changes to dates or new grants that could help you with improvement costs, so make sure you keep track of these.
If you’re still not sure what your EPC landlord requirements are, or how to meet them, then talk to some letting agents about their landlord services. They can guide you through the process and make sure that you’ve got everything covered.
Having an energy efficient property is beneficial to the environment and to your tenants, so there are great benefits to making improvements. With the swift hikes in energy prices, your property will be much more attractive to tenants if you can prove that their energy bills will be kept to a minimum.
If you’re weighing up your options and want to find out what your rental properties currently worth, book a free valuation with us today.