How do the new EPC rules affect your rental property?

Energy efficiency in homes has become an increasingly important topic in recent years, with a growing awareness of the environmental impact of energy consumption. Improving energy efficiency can not only reduce carbon emissions, but also lower household bills. Energy Performance Certificates (EPCs) are a measure of a property’s energy efficiency, but new laws on EPC ratings look to apply pressure on landlords to make improvements to their properties.

In this article, we will explore the changes to EPCs that landlords need to be aware of.

What are the new rules for EPC ratings?

From 2018, a new law set out that it would be illegal to let a new commercial property with an EPC rating of lower than an E. In April 2023, this law came into effect for any existing rental properties, stating that it would be an offence to continue renting a property that has an EPC rating of lower than E.

The responsibility to uphold the EPC sits with the landlord and it’s important to note that this responsibility cannot be passed onto the tenants.

This new law could see landlords having to spend a considerable amount on their properties in order to bring them up to this new standard. However, there are exemptions to this which we’ve listed below.

EPC exemptions

‘All relevant improvements made’ exemption

In the event that the property cannot be upgraded to an EPC rating of E, even after making improvements up to the cost of £3,500 (inclusive of VAT), or if there are no further upgrades that can be made.

‘High cost’ exemption

In the event that no improvements can be made because even the cheapest recommendation exceeds £3,500 (including VAT).

Wall insulation exemption

In the event that the only improvements that can be made are cavity wall insulation, external wall insulation or internal wall insulation (for exterior walls) AND that you have written advice stating that these improvements would negatively affect the structure of the property.

Third-party consent exemption

In the event you need consent to make improvements to the property from third-parties such as tenants, superior landlords, mortgagees or planning departments and despite your best efforts this consent cannot be obtained.

Property devaluation exemption

In the event that you have evidence that the improvements to the property would negatively affect its value by more than 5%.

For more information about exemptions and how to register for an exemption, you can visit the gov.uk webpage.

What does the future of EPC ratings look like?

In line with the government’s net 0 strategy, they have proposed that every rental property must achieve an EPC rating of C or higher by 2028. Initially, the plan was to implement the new regulations for new tenancies starting in 2025, followed by all tenancies from 2028. However, this was revised in March 2023, with the deadline for all rentals now being 2028.

While EPCs are a vital aspect of the rental property market, new regulations will see landlords needing to take action to bring their properties up to a minimum E rating or above. While this may require some upfront investment, it is a necessary step to ensure that properties are energy-efficient and sustainable for the future. By making these improvements, landlords can not only avoid penalties but also attract tenants who are increasingly environmentally conscious.