The rules on Energy Performance Certificates (EPCs) are changing and a failure to act now could mean a rental is unlawful so not only is rental income (or a sale) lost but fines are incurred.
Since August 2007, an EPC (certifying the energy efficiency of a building) has been necessary whenever a property has been bought, sold or rented. From next year, however, minimal requirements will apply to privately rented properties.
What does this mean for landlords?
From 1st April 2018 any property with an EPC rating of F or G must be improved or taken off the rental market. It is predicted that around 330,000 properties will be affected.
For some landlords, this new requirement will not be an issue however some properties, particularly Victorian and Edwardian properties, may struggle to achieve the minimum E rating, regardless of how much time and money is spent on improvements.
Although the government has proposed a cap of £5,000 for improvement costs, some landlords believe that they will need to increase rents to fund improvement works and The Residential Landlords Association has noted that any savings on utility bills could be counteracted by increased rents.
What should landlords do now?
It is crucial that landlords prepare now for the upcoming regulations and we’ve set out below our 5 top tips:
- Review leases to determine expiry and renewal dates. From 1st April 2018 new tenancies and renewals will be subject to the new regulations, but will be extended for existing tenancies to 1st April 2020.
- Review current EPCs. EPC certificates are valid for 10 years but check your rating now.
- Check whether any exemptions apply. Certain domestic buildings are excluded from the new regulations. If an exemption does apply, it will need to be registered on the Public Exemptions Register.
- Consider whether improvement works are necessary. If your rented property has an EPC rating of F or G, you will need to make energy efficiency improvements to bring the property up to at least an E rating if you want to continue to let it.
- If improvement works are required:
Early planning: make arrangements for carrying out improvements sooner rather than later. Although the regulations do not come into force until 2018, don’t be left in a situation where there are not enough suppliers to carry out any required works.
Minimum rating: currently, as long as an E rating is obtained, no improvement works are required, however consider how long it will be before the target is a D rating and then a C rating. With energy costs predicted to double over the next ten years, doing more work now should mean more costs savings in the long run.
Explore funding options: there are a variety of grants and loans available and some local authorities may offer local schemes.
Thursfields’ Commercial Property team have the breadth of knowledge, experience and ability to advise on any aspect of commercial property. To speak to an expert or book an appointment at one of our offices, please contact a member of the team on 01905 730450.