As a landlord, you are required to provide an Energy Performance Certificate (EPC) for your property. The energy performance rating of your property must be displayed on any property adverts, and you also must provide a copy of the EPC to tenants when they move in.
An EPC is valid for 10 years, and until recently this made being EPC compliant fairly straightforward.
What is the Energy Efficiency (Private Rented Property)(England and Wales) Regulations 2015?
This is a piece of legislation that established a minimum requirement for energy efficiency for privately rented properties - both domestic and commercial - across England and Wales.
This legislation means that from April 2018, properties must have an EPC rating of E or better before landlords can execute a new tenancy, either for new or existing tenants.
Landlords who fail to comply are liable to be fines. Fines may range from £2,000 up to £150,000, and will be set relative to the value of the property along with the degree and length of non-compliance.
From April 2020, the legislation will apply to all privately rented properties in England and Wales regardless of whether there has been a new tenancy, and from April 2023 for non-domestic properties.
How Many Landlords are Affected?
A report from Burnetts stated that EPC Register data indicated that 20% of commercial properties had an E rating, with 18% having an F or G rating.
Although no data was available for domestic lets, what we do know is that very few properties ever achieve an A or a B rating during an energy performance assessment.
Furthermore, a LandlordZone report highlighted flaws in the way that EPC ratings are generated. Sometimes, an EPC assessor may have only received limited training, and the data that is input into a computer algorithm to generate a rating could leave two similar properties with ratings anywhere on a scale of C to G. Clearly a situation where potentially being liable to a huge fine comes down to "luck of the draw" of who your EPC assessor is and how they grade specific features in your property is unacceptable.
Almost every private landlord in England and Wales could be affected, unless they're in the very small number who reliably achieve A or B EPC ratings for their properties.
What Can Landlords do to Ensure They are EPC Compliant?
While the Government's drive to make the buy-to-let service industry more professional is admirable, this specific measure comes on the back of a number of pieces of legislation that have already challenged landlords to the point where as many as 1 in 5, according to one of our own surveys, are selling off their properties.
With rental yields already challenged by legislative changes in the past few years, landlords could quite easily find themselves in a situation where they don't have the funds they need to make a significant capital investment and make improvements to their property, but knowing that they face a fine if they don't.
Although the outcome of any challenges to the legislation remains to be seen, it is unlikely that the challenging environment landlords find themselves in will be accepted as an excuse for having not taken action. However, if landlords are able to demonstrate inconsistencies in the EPC process - for example by having two EPC assessments for their property with different results - then it may change how this is interpreted.
In any case, landlords should certainly be looking to do what they can to make their properties as energy efficient as possible. While the Government have introduced this legislation primarily for environmental reasons, investing in energy efficiency measures could help landlords to make their property more marketable and attract a larger pool of potential tenants.