The UK has now committed by law to become carbon neutral by 2050. According to data, residential properties as a whole produce masses of greenhouse gases. It’s something we as property owners can do something about, and something we are doing something about.
Now is a good time to remind landlords – both in the student and general population – of current legal requirements on energy efficiency. Plus, we cover changes to energy performance targets over the next few years.
Changing Minimum EPC Ratings
To hit the intended target, every residential property must reach a minimum EPC rating of Grade C by the year 2035. The problem now is that around 2/3 of properties (currently) are rated D or below. You have 14 years to ensure your properties reach this minimum standard. If 2035 arrives and the property does not reach Grade C, you will not be permitted to rent it out.
Right now (spring 2021), your property must have an E rating as listed in the MEES regulation. This applied to new tenancies from 2018, and to long-term / existing tenancies since 2020.
The government is also considering introducing mandatory reporting of EPC ratings for banks and building societies when issuing mortgages (this includes BTL mortgages). If they fail to hit those, fines could follow – more details are below.
The Situation Now
The law currently states that landlords must improve the energy efficiency of their properties to ensure they reach the minimum EPC. It states you should spend up to a maximum of £3,500 on improvements. If you spend to that threshold and it doesn’t improve the rating to “E”, you become eligible for high-cost exemption and can still let the property (as it currently stands).
Listed and protected properties are exempt from the MEES scheme for required improvements if it would unreasonably alter the property. EPCs are valid for 10 years from issue. However, there are exceptions. An EPC can still stand beyond 10 years if you still have the same tenants.
Mortgages and Loans
As landlords to student properties, your tenant turnover is much faster. Over the last ten years, you could have had as many as 10 different sets of tenants. This is normal and so you should have kept up to date and had a new EPC certificate issued 10 years after the first.
What might impact you now and in future are the proposed changes that could see extra levies on poorly insulated properties. Under these plans, the Department of Business (DoB) will force mortgage providers to upload energy ratings to a government system. Those that are under par will be required to improve. Fines may follow, which providers may levy on top of the mortgages.