How Landlords Can Reduced the Cost Impact of Upcoming EPC Regulations

The government has recently proposed new EPC regulations that will change the Minimum Energy Efficiency Standards. It is proposed that all rented properties will need to meet a minimum C rating by 2025. This case study demonstrates that the introduction of these regulations don't have to be costly for landlords.

The government has recently proposed new EPC regulations that will change the Minimum Energy Efficiency Standards. It's planned to take effect in 2025- these changes will impact the domestic rental property in England and Wales. Currently, the minimum energy efficiency standards (MEES) allowed for rented properties are an E rating on their Energy Performance Certificate (EPC). The new EPC regulations would mean that from 2025, your rented property would need to have a certification rating of C or above. This could have costly implications on landlords who need to carry out work to get their EPC up to the new minimum standard.

We were recently contacted by one our landlords who’s property's EPC rating was D. They were concerned about the work they needed to do in order to ensure it complied with proposed changes ahead of 2025. Their most recent EPC had provided some suggestions of energy efficiency measures they could undertake to achieve this, including costly options such as external wall insulation or adding solar panels.

(It is important to note at this stage that there are some exemptions for undertaking energy efficiency measures, such as the case the property is a listed building, or when the costs of the works exceed a certain amount (high cost exemption). However, it is widely expected that the current threshold for the high cost exemption could increase from £3,000 to circa £10,000, meaning measures such as wall insulation and solar panels are brought inside this limit and would need to be undertaken.)

Back to the example. On closer review of the landlord's EPC, there was one phrase contained within the EPC which piqued our curiosity. After describing the structure of the external walls it appeared that the structure was ‘assumed’. You might guess where this is going... The domestic energy assessor who had undertaken the previous EPC had assumed the external walls were a double course of solid brick. As it turned out, this was not the case. We had some prior knowledge of the conversion works that had been undertaken at the property where insulated plasterboard had been used on the inside of the external walls. That meant the potential energy calculation of the walls (from a thermal efficiency point of view) were actually better than they were assumed to be.

The next step was then to get a new EPC produced with this assumption included. However, a domestic energy assessor cannot simply take your word for this, they need to see some evidence. In addition, and in most instances, they will need a ‘U-Value’ calculation. This needs to be carried out by a BRE approved professional and they will need to know the details of type/size/area of the insulation used in order to produce this. Once the U-Value calculation(s) are obtained, a domestic energy assessor can complete the EPC and provide you with a true score. In this case, the EPC rating went from a D to a C! The landlord (who thought they were due to spend thousands of pounds on energy efficiency measures) spent only a few hundred pounds on obtaining U-Value calculations and a new EPC (which will be valid for a further 10 years).

So, what’s the point of the story. Firstly, we would advise you to check the small print of your report and (if you can) verify that the assumptions within the report are correct. EPCs are often undertaken quickly and without any invasive investigative work. Domestic energy assessors will rarely look into lofts without easy access, or spend time understanding the make up of wall structures if the information is not readily available to hand. In the past majority of cases this will not have mattered. Most domestic property in the UK will be rated ‘E’ or better, but that is not the case for new proposed measures. It is therefore of vital importance to check through the details of the report and, if necessary, take the relevant action.

In a more general sense, it seems sensible to ensure that energy efficiency of homes in the UK is improved in line with global CO2 emissions targets (rented or not) but if landlords have already taken these steps, it is also important to have these recognised.

Our top tips:

1) Review EPC documents sooner rather than later. Check the small print!

2) If you do need to undertake work, don’t want until the last minute to do it. Lots of people will be in this boat and as such, there may be less choice available to you in terms of cost or quality.

3) Check whether you qualify for any exemptions. If so, find our what you need to do to comply with them and take the appropriate steps. Again, sooner rather than later.

If you are one of our fully managed landlords and you have questions about your EPC, or about what you may need to do in order to comply with the expected legislation, please give your property manager a call to discuss how we may be able to assist you.