Buy-to-let landlords can no longer claim a funding exemption from making their properties more energy efficient – meaning they could be on the hook for improvement costs of up to £3,500 and fines of up to £5,000 if they fail to make necessary changes.
In April 2018, rules came in requiring privately rented properties to have a minimum energy performance certificate (EPC) rating of E, but some landlords were exempt from having to improve their properties.
As of 1 April this year, landlords who cannot secure government funding to help bring their properties up to an E rating can no longer claim this exemption, and will have to pay for work to be done themselves.
Here, we explain what the regulations mean, outline energy efficiency improvements you can make, and reveal further rule changes coming in the next few years.
What are the energy efficiency rules for buy-to-let landlords?
The Minimum Energy Efficiency Standards (MEES) were introduced in April 2018, requiring rented properties with new or renewed tenancy contracts to have a minimum energy performance certificate (EPC) rating of E.
Landlords who fail to comply could face fines of up to £5,000.
Until this month, landlords were able to register for the ‘no cost to the landlord’ exemption, which meant that they didn’t have to make improvements if it would leave them out of pocket. However, this exemption was lifted on 1 April.
Landlords with properties rated F or G for energy efficiency will now have to cover the cost of improvements up to a cap of £3,500 if they can’t find alternative funding.
Exemptions are still in place for properties that will cost more than £3,500 to bring up to standard, but landlords may still have to pay for improvements up to that cap.
How much do energy efficiency improvements cost?
While £3,500 is not an insignificant sum, it’s worth noting that only a few buy-to-let owners will face costs this high; it costs an average of £1,200 to upgrade older properties to an EPC grade E.
For context, EPC ratings range from A (best) to G (worst). New-build homes tend to have high EPC ratings, while older homes often have lower ratings of D or E.
The average EPC rating for a UK home is D – so landlords aren’t being asked to make properties any more energy efficient than the average home.
How long does an EPC last for rental properties?
EPCs are valid for 10 years. If you’re not sure when yours needs to be renewed, you can look it up in the EPC register, a government database of every EPC in the UK.
The EPC register is also a good way to check how energy efficient a property is if you’re thinking of buying it – and therefore, whether you’re likely to incur extra costs to improve its EPC rating.
How to improve your EPC rating?
If your property has been given an EPC rating of F or G, there will be a list of ways to improve the property, along with general costs of what you’ll need to spend on the work.
Common recommendations include:
Insulation for your floors, roof, loft and walls – all of which reduce the need for heating
Double glazing, as it keeps in much more heat than single-glazed windows
Solar panels, as they’re a more environmentally friendly way to produce energy
Low-energy lighting – achieved simply by the use of low-energy light bulbs.
For help funding home improvements for energy efficiency, you may be able to get a loan from the Green Deal Finance Company – an alternative to the original government-backed Green Deal scheme, which closed in 2015. Our guide on The Green Deal explains how this works.
Further EPC regulation changes in 2020
Landlords with existing tenancies will have avoided having to make any energy efficiency changes so far, but that will change from next year.
From 1 April 2020, MEES will apply to all tenancies, regardless of when the lease was granted.
This means that all landlords will need to make sure their properties adhere to the guidelines – and, if this applies to your buy-to-let, it would be wise to start making a plan now to make sure you’re ready for that deadline.
From 1 April 2023, the rules will be rolled out to tenanted commercial buildings.
Are any properties exempt from MEES?
There are a few properties that don’t need an EPC, including:
temporary buildings that will be used for less than two years
listed buildings if the work would alter the building’s character (get advice from your local authority conservation officer about this)
residential buildings intended to be used for less than four months per year
holiday accommodation that’s rented out for less than four months per year/is let under a licence to occupy.
Advice on your buy-to-let mortgage options
If you’re thinking of remortgaging your buy-to-let property, the whole-of-market brokers at Which? Mortgage Adviser scan advise on the cheapest option for your personal situation.
Call them now on 0808 120 8749 or fill in the form below for a free callback.