New energy laws could trip up buy-to-let lenders

February 23, 2018


Buy-to-let lenders are not ready for new energy efficiency laws that may put the brakes on new business.


The regulations – which come into force on April 1 – make it illegal for landlords to start new tenancies without the property having an Energy Performance Certificate rating of ‘E’, or higher.


This applies to both new and existing tenants.


As this will be a legal requirement, lenders are not expected to provide mortgage finance for buy-to-let properties without the required EPC.


While some lenders have already made changes to the information they will require from landlords others have still not updated their criteria.


Mortgage brokers say they have received little or no information from lenders about how these changes will affect their clients.


Some fear that this could adversely effect affordability calculations for some portfolio landlords.


Mortgages for Business chief executive David Whittaker says: “If I’m assessing a borrower’s portfolio of properties and some have low grade EPCs how will lenders view this? Will they need to be classified as vacant?”


He points out that landlords will still be able to collect rent on this property until the tenancy is due to be renewed.


This could potentially leave landlords struggling to remortgage existing properties – even those that have the required EPCs – while they invest in energy efficience measures on older properties.


He says brokers need greater clarification from mortgage lenders on this issue. “I’ve spoken to every lenders and now one of them has told me what they are going to do about it,” he says. “This is going to be the market’s next big hurdle.”


He says this is also going to require more paperwork from brokers, who will require lenders to get these certificates.


Most lenders do not ask for these EPCs at present.


Of the 10 buy-to-let lenders contacted by Mortgage Strategy, only three were able give clear details about their policy regarding this regulatory change.


Accord is one of the few lenders to have updated their lending requirement.


The firm says that since November 10 it has required an EPC of ‘E’ or above.


Before this it only required brokers to provide the electricity and gas certificates to prove the rented property met the required legal standards.


Accord’s commercial manager Chris Maggs says: “We recently changed our lending policy ahead of the April deadline date. Therefore brokers will not be required to do any additional work when submitting a case with Accord.”


He said he did not anticipate this change causing widespread problems for brokers or landlords, as only a small percentage of properties will be impacted by the new energy efficiency rules.


Typically properties build in the last 20 years are likely to meet the required energy efficiency standards. Problems are more likely to occur with older properties.


Landlords may be able to obtain ‘green deal’ finance in order to bring properties up to the minimum requirement. Maggs adds: “Where this isn’t available landlords may be able to gain an exemption.”

Exemptions may also apply for selection properties, such as listed buildings.



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