While the buy-to-let market continues to thrive, with landlords making up 12% of all UK house purchases in 2022 (the highest level in six years)1, it’s worth considering the government’s impending energy efficiency rating changes to rental properties before you lock in your new mortgage rate.
What are the current EPC regulations for landlords?
Currently, any property in England, Scotland or Wales being built for sale or rent requires an Energy Performance Certificate (EPC).
Landlords currently need an EPC rating of E or above for prospective tenants, which is valid for 10 years. At the moment, landlords only need to get a new EPC if they’re letting out to a brand new tenant. In 2021, changes to the Minimum Energy Efficiency Standards were announced that will affect landlords and rentals from 2025.
What are the current EPC regulations for landlords?
Currently, any property in England, Scotland or Wales being built for sale or rent requires an Energy Performance Certificate (EPC).
Landlords currently need an EPC rating of E or above for prospective tenants, which is valid for 10 years. At the moment, landlords only need to get a new EPC if they’re letting out to a brand new tenant. In 2021, changes to the Minimum Energy Efficiency Standards were announced that will affect landlords and rentals from 2025.
What is the latest change and when are they due to take place?
The new regulations form part of a bill currently being passed through Parliament, known as the Minimum Energy Performance of Buildings (No. 2) Bill. The current proposal is that all new tenancies must have a minimum energy efficiency performance of at least C from 31 December 2025.2
In addition, the government is considering that all existing tenancies (as well as all residential properties) must have at least an EPC rating of C from 31 December 20283, where practical, cost-effective and affordable. All of the above proposed EPC deadlines aim to make homes more energy-efficient and reduce carbon emissions as part of the government’s target to be net-zero by 2050.
How will these changes impact landlords?
Achieving an EPC rating of ‘C’ will be more difficult than an ‘E’, particularly for older properties. The government has recommended a “fabric first” approach, which means fixing your wall, loft and floor insulation first. They also recommend installing a smart meter.
Energy performance investment is currently capped at £3,500 for landlords, but as the higher EPC rating will require a greater investment, the cap will be raised to £10,000. Government figures estimate that landlords will spend around £4,700 on improvements to reach a C rating.4
What are the penalties if the deadline is missed?
If you don’t provide a valid EPC for your property to a prospective tenant, you could face penalties. From 1 April 2023, it will be an offence to continue to let or rent out a property if it does not have a rating of at least E. The penalty is based on the rateable value of the property and will be between £10,000 – £150,000 per breach.5
What are the benefits of improving the EPC rating of a buy-to-let property?
With many landlords looking to secure longer-term mortgage deals amidst inflation and increases in the Bank of England’s bank rate, the change in regulations is something you’ll have to consider before you lock in to a fixed mortgage deal. This is because any long-term deals secured now will likely run over the deadline by which properties would need to be EPC compliant.
It’s important to note that there is a correlation between an improved EPC rating and a higher property value, not to mention a decrease in your energy bills and a lower carbon footprint.
It’s worth putting together a cost analysis for any energy efficiency upgrades you may need. If you’re worried about the financial implications of retrofitting your buy-to-let property, you may be eligible for a green mortgage. This could provide you with a lower interest rate or increased loan amount to carry out the necessary renovations to make your property ‘greener’.
If your mortgage deal is coming to an end and you’re unsure about what to do next, speak to an adviser about your remortgaging options.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
Ten steps to eco-proofing your home
What’s an EPC rating?
