There are new EPC rules and MEES regulations on the horizon, and it’s vital for every landlord to be well-prepared.
As the government pushes forward with its ambitious energy efficiency agenda, EPC regulations are currently undergoing thorough review and revision.
However, there’s a level of uncertainty in the mix because, even though the government started a consultation in 2020, we still don’t have a clear picture of what the final legislation might look like for England and Wales.
This uncertainty poses a significant challenge for landlords striving to stay compliant. So, let’s delve into the current EPC requirements and explore potential changes in the near future.
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What are the current EPC rules and requirements?
Since 2008, it’s been a legal requirement to have an Energy Performance Certificate (EPC) when you sell a property or rent it out.
In April 2018, the Minimum Energy Efficiency Standard (MEES) was put in place to make privately rented houses and buildings more energy-efficient.
This meant that all properties for rent or sale in England and Wales had to have an EPC rating of at least ‘E’.
Fast forward to April 2020, and the MEES expanded its reach, encompassing all existing tenancies, not just new agreements or renewals.
In practice, this means that if your property doesn’t have a valid EPC rating of ‘E’ or higher, you are not legally allowed to lease it.
Landlords who fail to adhere to these standards are at risk of facing hefty fines, which could reach as high as £5,000.
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What are the new EPC rules and requirements for landlords?
Following a consultation in December 2020, the government put forward a proposal to ramp up energy efficiency standards for privately rented homes.
Since draft regulations haven’t been published yet, and the final legislation remains unclear, it’s best to take this information with a grain of salt.
Among other things, the proposal outlined in the consultation paper suggested raising the Minimum Energy Efficiency Standard for privately rented properties to an EPC grade ‘C’.
These new rules would be introduced for new tenancies starting in 2025 and gradually be extended to cover all tenancies by 2028.
After extensive efforts from landlords and various stakeholders, there appears to be a potential shift in the Department for Energy Security and Net Zero’s stance regarding these deadlines.
In September 2023, the government announced that it’s scrapping policies to force landlords to upgrade the energy efficiency rating of their properties.
Instead, it will focus on encouraging households to make energy efficiency-related upgrades on their own accord.
How can landlords prepare for the new EPC regulations?
While 2025 and 2028 might appear far off, the schedule for these proposed EPC regulation changes is actually closer than it seems.
Based on data from OpenRent, nearly 40%* of privately rented properties in England and Wales currently hold EPC grades below ‘C’.
For properties that currently hold the minimum EPC rating of ‘E’, upgrading to ‘C’ will likely demand substantial effort and investment – around £4,700 according to government estimates.
One plan of action would be to upgrade your properties gradually, which allows you to spread out the costs.
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For example, you can start by adding extra loft insulation one year and then focus on improving wall insulation or upgrading windows and doors the next.
With careful planning, you have a good chance of meeting the required EPC rating by 2028. Taking action early is also smart because, as the deadline approaches, the demand for skilled tradespeople is likely to increase.
Last but not least, if you believe your property might qualify for an exemption from the MEES rules, it’s important to register that as soon as possible.
What are the current exemptions from the EPC and MEES regulations?
If the property has a low energy rating, and the landlord believes the property cannot be improved to meet the minimum ‘E’ rating they can apply for an exemption from the MEES regulations.
Various types of exemptions include:
- ‘High cost’ exemption
- ‘7 year payback’ exemption
- ‘All improvements made’ exemption
- ‘Wall insulation’ exemption
- ‘Consent’ exemption
- ‘Devaluation’ exemption
- ‘New landlord’ exemption
In line with the current regulations, some properties may be exempt from EPC regulations if the cost for upgrades to meet the requirements goes beyond £3,500.
However, if the government’s proposal goes ahead this figure could be adjusted by 2025, with the cap being raised to £10,000.
*The percentage of live listings that have an EPC rating lower than ‘C’ is 38.72%, as of September 7, 2023. (Source: OpenRent)