The introduction of the minimum energy efficiency standards (MEES) for private landlords came and went with very little fanfare in April 2018.
A significant number of landlords utilised bridging loans so that all newly rented properties in the UK met the legal minimum energy performance certificate (EPC) rating of ‘E’. So far, so good.
But, according to property technology solution provider Spec, 15% (around 2.5 million) of EPCs for properties in the UK are “incorrectly rated”.
At the outset, it seems prudent to remind ourselves of the MEES legislation. From 1st April 2018 all landlords were prohibited from granting new tenancies for properties with an EPC rating of F and G, which includes extensions and renewals of existing tenancies.
The consequences for not doing so are not insignificant; failure to meet the EPC standard can result in a fine of up to £4,000.
Come 1st April 2020, all domestic properties that are being let must have an E rating or higher, whatever the tenancy status.
Therefore, the revelation that an estimated 2.5 million EPCs are claimed to have been inaccurately rated — which could leave many unsuspecting landlords open to fines — is not welcome news.
The flawed findings
Spec claims that an estimated 35,000 E-rated rental properties could be below the legal standard for the residential lettings market.
t states that many EPC scores would be downgraded if the floor space was inaccurately measured. The study claims that one in four EPCs measuring the size of a property were inaccurate by at least 10%.
Spec explains that a 1% change in floor space can result in a one-point change in an EPC score, which will ultimately affect the final rating.
Another financial difficulty
Last year, many landlords turned to bridging to address the issue. The PRA changes meant many landlords were unable to fully service their loans using income generated by their investment due to tougher portfolio stress tests and new tax implications.
Added to that, some mortgage lenders are reluctant to provide finance for buy-to-let properties without the required EPC rating.
This left landlords struggling to remortgage existing properties — even those that have the required EPCs — while they invested in energy efficiency measures on older properties with an ‘F’ or ‘G’ rating.
A bridge for brokers
While this article has so far been a negative overview of another problem facing private landlords in an ever more regulated market, positive brokers now have the opportunity to grasp the nettle and contact their clients to tell them the news.
As we know, ignorance is not an acceptable excuse should the council come knocking to clarify a property’s EPC rating.
The good news is that bridging finance is designed for landlords who find themselves requiring further remedial work to ensure their properties carry a conclusive EPC rating that will stand up to scrutiny.
EPCs are back on the landlord agenda, and bridging could well be the answer.