How to Reduce Costs and CO2 Emissions While Meeting Government Regulations and Lender Requirements.
The sun is finally out. Daffodils are lighting up the front garden of your new rental property. You’re waiting for your new tenants to arrive, so you can show them around and hand over the keys.
But there’s a niggling feeling at the back of your brain. Have you forgotten something?
You thumb through the myriad of documents you’ve thoughtfully displayed in a folder, ready to present to your tenants.
Gas Safety Certificate? Check.
Electrical Safety Certificate? Check.
Electrical Performance Certificate? Check…
But that EPC rating just won’t cut it.
As a residential or commercial landlord, it’s essential to grasp an understanding of EPC (Energy Performance Certificate) ratings and their importance, as they can have a significant impact on energy costs, CO2 emissions, and your property’s value.
You also need to be aware of the government’s 'net zero' strategies, and how not complying can leave you facing a whopping fine of up to £30,000.
That’s why, in this ultimate guide, we’ll explore how you can save money, comply with government regulations and attract more tenants by improving your current EPC rating. As an added bonus, you’ll do your bit towards saving the planet – and that’s a win in anyone’s book.
What are EPC Ratings and why are they important for landlords?
First thing’s first – you need to understand what an EPC Rating is, and why you should care about it.
An Energy Performance Certificate (EPC) rating is a measure of a property’s energy efficiency, and gives an idea of how much it costs to run.
They were first introduced in 2007 and became a legal requirement in England, Wales, and Northern Ireland in 2008, and in Scotland from 2009.
The aim was to encourage homeowners and landlords to become more aware of the benefits of energy efficiency, and improve transparency about the running costs of properties.
There are two types of EPCs: domestic and commercial.
If you are buying or renting a residential property, you will require a domestic EPC. It’s needed whenever a property is built, sold or rented, and you must have an Energy Performance Certificate to present to potential tenants before marketing your property.
You’ll require a commercial EPC when you rent or sell the property, when your building under construction is completed, or whenever there are changes made to heating, air conditioning or mechanical ventilation systems.
There are some exemptions – we talked about them in a recent Insights post.
What are the different ratings?
You’ll probably have noticed these stickers stuck on appliances like your boiler, fridge, and dishwasher, and used them to compare which is most cost-efficient to run:
In the same way, the rating scale makes it easier to compare buildings, with A being the most energy-efficient and G being the least.
New builds tend to have higher EPC ratings as they will have been fitted with newer energy efficient windows, boilers and lighting, while older homes have EPC ratings of around D or E.
How are EPC Ratings calculated?
EPC Ratings are based on how much energy your property uses per square metre, versus how much it loses.
Windows, insulation, boilers and lighting are all taken into consideration – for example, the accredited energy assessor will look at how energy efficient the boiler is, how well the property is insulated, what energy source is used (electric, gas, oil etc), what type of shower has been fitted, and whether the property has any renewable energy technologies, such as solar panels, installed.
These results will then be used to calculate the property’s overall SAP score, between 1 and 100 (and unless your property generates more energy than it uses, don’t worry about achieving a 100 score!).
The national state of rental property EPC ratings
In 2021, the Government conducted an English Private Landlord Survey, which showed that more than a third of landlords own properties with an EPC rating of C or above (35%), or with an EPC rating of D (38%).
Worryingly, a staggering 18% reported not knowing the EPC rating of their property or properties.
This previously wouldn’t have been such a big issue, as since 2018’s Minimum Energy Efficiency Standards, all properties being let or sold in England and Wales have had to have a minimum EPC rating of E or above.
But rules are changing…
5 reasons why you need to know your EPC rating
Under new government proposals, the fine for not having an EPC will increase from £5,000 to a whopping £30,000.
So, apart from Government Legislations and huge fines, why else should you find out your current rating?
Here’s five reasons:
1 – Your EPC Rating’s impact on energy costs
EPC ratings (and therefore the efficiency of your property) have a significant impact on energy costs.
A property with a high EPC rating is likely to be more energy-efficient, resulting in lower energy bills for your tenants, and for you.
Let’s look at a real-world example of a two-bedroom house, with two tenants:EPC BandAnnual Fuel BillMonthly Fuel BillG£1632 – £2209£136 – £184F£1557 – £2108£130 – £176E£1370 – £1855£114 – £155D£1116 – £1511£93 – £126C£928 – £1257£77 – £105B£649 – £879£54 – £73A£343 – £465£29 – £39
As you can see, even just a single band increase can save you hundreds of pounds a year – and as we’ll see later in our guide, making recommended improvements to improve your EPC Rating doesn’t have to cost a fortune.
2 – Your EPC Rating’s impact on CO2 emissions
As we all know, one of the biggest contributors to global warming is carbon dioxide.
The energy we use for heating, lighting and power in residential properties produces over a quarter of the UK’s carbon dioxide emissions, with different fuels producing different amounts of carbon dioxide for every kilowatt hour (kWh) of energy used.
According to Savills, each EPC grade climbed represents a 30 – 40% reduction in CO2 emissions per year – and if all residential properties were upgraded to their potential rating, we could halve the amount of emissions they put into the atmosphere!
3 – Your EPC Rating’s impact on property value
EPC ratings can have an impact on property values, so it’s worth contemplating improving your rating before selling or renting your property.
A property with a high EPC rating is likely to be more attractive to potential buyers or tenants, resulting in a higher value or rent.
As shown in the graph below, raising your EPC from a G rating through to a higher A rating can lead to a 14% increase in property value.
Figure 1 – Source: MoneySupermarket
4 – Your EPC Rating’s impact on attracting tenants
Properties with higher EPC ratings can attract more potential renters and home buyers.
Tenants know that higher energy efficiency results in lower utility bills – and in a time where energy bills are a huge concern for a large percentage of the population, every penny counts.
Having an eco-friendlier property can also help to attract tenants and even improve the rental return you can get.
5 – Your EPC Rating’s impact on your mortgage
If you’re a landlord considering a property with a low EPC rating, such as ‘F’ or ‘G’, your mortgage application may be at risk of failure.
The UK Government’s plans require all residential properties to have an EPC rating of C or above by 2035, and this could mean that mortgage lenders will have to ensure an average EPC rating of C across their lending portfolio by 2030.
As a result, lenders are likely to become more stringent when it comes to energy efficiency, making it harder to obtain a mortgage or re-mortgage on properties that don’t meet the required standards.
Some lenders are already rejecting buy-to-let mortgage or re-mortgage applications for non-compliant properties.
If a lender discovers that a property breaches the EPC rules, and the landlord cannot meet the requirements, the lender would be entitled to demand repayment of the loan.
One in 10 renters have said they would be prepared to stay in their home for longer if changes were made to it, with a significant number prepared to pay more for these changes – for example, 18% said new windows would justify an increase in rent.
How to find your property’s EPC Rating
No need to dig through piles of paperwork to find your rating – you can find the results of your last EPC assessment using the Government’s free search tool which will give you your rating, expiry date, actual and potential ratings. It’ll also outline estimated costs of recommended works and potential returns on your energy bills.
If there isn’t a report, or you need to renew it, you can request an assessment on the Government website, costing between £35 – £120 depending on the property.
Make sure to scrutinise your report carefully, as EPC assessors may have made some reasonable assumptions in producing the certificate which, if incorrect, could affect your available improvement options or the rating itself.
How to read your EPC report
The first section of an EPC looks at your property’s estimated costs for energy in terms of lighting, heating and hot water. This is useful to know how much a property’s energy utility bills will currently be, and how much you could save with targeted recommendations.
Remember – this is an estimate of running costs and not based on energy used by individual households, as it excludes energy used for running appliances, such as computers, cookers, fridges and TVs.
The next section shows which EPC rating your property has, and looks similar to the energy labels on home appliances. It also shows the potential rating if you were to make the suggested improvements.
Some EPCs will have a similar table showing the property’s environmental performance. This shows how the building performs in terms of carbon dioxide emissions.
The third part of your certificate gives a breakdown of each element of your property, including your walls, roof, floor, windows, main heating, main heating controls, secondary heating, hot water, and lighting.
After each of these will be a description and a rating. This is sometimes given from one to five stars, with five being the best, or from Very Poor to Very Good.
Finally, you’ll see a breakdown of recommendations, included the related costs and typical savings. It will also show how much impact the recommendation will make on your rating, should you carry it out.
So how do you improve your EPC Rating?
Now you’re an expert in EPC ratings and fully invested in improving your own.
But where do you start?
Your EPC report will provide recommendations to suit your property, and making these your priority will produce the most effective increase.
Here’s a breakdown of some of the most common improvements available for residential properties, and how you can benefit in terms of energy savings:Improvement TypeTypical CostAnnual Energy SavingsEffectivenessRoom-in-roof insulation£1500 – £2700£837Suitable for a property with a low EPC rating of G, F or EDraught proofing£80-£120£18A quick and affordable improvement, most effective in a property with a rating of between E and DLow-E double glazed windows (made from low emissivity glass)£3,300-£6,500£123Suitable for properties with single glazed windows which have an EPC rating of CSolar photovoltaic panels£5,000-£8,000£287A substantial improvement which will have the biggest impact in a property that already has an EPC rating of just below a B
I’m a landlord, what can I do to start preparing for the new rules?
The most important thing is to deal with the problem now, before it becomes a crisis.
Review your property portfolio and highlight any properties that do not already hold an EPC rating of C or above, then request quotes for carrying out the work recommended in your report. Finally, assess the most cost-effective options, and compare against any estimated returns.
Don’t forget – larger works may cost several thousand pounds, but energy-efficiency improvements should be seen as a long-term investment, which will make your property more attractive to new tenants in the long term and hopefully keep reliable tenants in the property for longer.
Key EPC dates to rememberTypeDateItemResidential1st April 2020At least E RatingResidential1st April 2025At least C Rating – New lettingsResidential1st April 2028At least C Rating – Existing lettingsCommercial1st April 2023At least E RatingCommercial1st April 2025Submit valid EPC to online PRC compliance and exemptions databaseCommercial1st April 2027At least C RatingCommercial1st April 2030At least B rating
Need a helping hand?
As one of the UK’s leading suppliers of EPCs, at Vibrant, we pride ourselves on the quality of assessments we carry out. Check out our Trustpilot to see what our customers think of us.
We’re fast, efficient, and have over 450 assessors located within every UK postcode, meaning we can deliver EPC reports within 3 days.
Our EPC Plus Service provides you with a complete overview of your current EPC performance alongside clear and targeted recommendations.
We’ll also help with recommendations for full project management, access to funding, EPC Post Works and PAS2035 Retrofit Works support.
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