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New legislation has brought EPCs and the Green Deal to the fore again. Upad Advertising Specialist Lucie Finan looks into this sometimes confusing subject.

So, Energy Performance Certificates. Just another hoop to jump through? It can seem that way when you look at your list of legal obligations as a landlord. But the government sees it as a step towards improving energy efficiency of homes and to encourage tenants to factor in energy ratings when choosing their next rental property. A certificate is valid for 10 years and costs £99, so it's hardly a big expense to satisfy the regulations.

The concept is that tenants will start to consider a property's EPC rating and this in turn will raise the standards for the energy efficiency of properties. The reality is that most tenants disregard the EPC and rarely factor it in when choosing their next rental property. But should they be more concerned? EPC's are indicative of fuel costs for the year, so the higher the rating, the less they will pay (and the warmer they'll be!).

Why do I even need an EPC?

With mounting pressure to respond to climate change, the government introduced the EPC requirements in 2008 to gather more accurate information on the amount of fuel being used by households and to raise awareness for both landlords and tenants.

Since October 2008, an EPC is required when a property is bought, sold or let. Exceptions include listed buildings and Houses in Multiple Occupation (let on an individual room basis) among a few others.

The regulations state that the EPC should be available as early as possible, preferably before marketing begins, but they allow a further 28 days after marketing has begun to provide one. Agents, including Upad, must display the EPC graph on property advertisements and ensure the EPC has been commissioned before property marketing begins. The reason for this is so that any prospective tenants who are interested enough to make an offer can do so with the full knowledge of the property including the estimated fuel bills. Given the continuing media focus on the apparent refusal of the energy companies to pass on falling costs of fuel, this is more likely to be a key concern of prospective tenants than at any time in the past.

As well as displaying your property's EPC rating when advertising, you should also make sure you have an EPC to show tenants when they view the property. You don't have to go out of your way to give them a copy, but make sure one is available should they ask. A copy should also be given to the successful tenant before they move into the property. Usually this will be given along with the tenancy agreement and other documents such as the deposit registration details, appliance manuals and the gas safety certificate.

The regulations are policed by Trading Standards. A Trading Standards Officer can fine a landlord (and agent) £200 each for failing to display an EPC when advertising or for not providing a copy to their tenants.

What's the deal with 'Green Deal'?

The Green Deal is a government initiative to incentivise Landlords to improve the energy efficiency of their property. Improvements can be made to their rental property to increase the energy rating and the costs are paid back through a finance plan in the (lower) energy bills. In most cases this means the tenant will foot the bill for the work although in theory this will be offset by the savings in energy consumption. There are both pros and cons however. Improving the energy rating of your rental property could help with marketing the property in the future and future tenants will take over the costs in their energy bills. The downside is that future tenants of the property may not be happy with paying the costs of an energy improvement that they hadn't requested. Potentially, this could affect the property's appeal.

You would need to ensure that prospective tenants are aware they would be paying for the Green Deal in their energy bills. If you don't, bill payers can raise a case with their Green Deal provider and Ombudsman and, if proven, the plan can be cancelled and would require the person who failed to disclose to pay compensation to the provider. Additionally, just as landlords are responsible for paying energy bills and council tax when a property is vacant, they would also take on the costs of the Green Deal repayments.

From 2016, tenants will be entitled to ask their landlord to carry out reasonable recommendations stated on the EPC to improve the energy rating of the property and landlords will be legally obliged to consent. Of course, this will be covered under the Green Deal so any requests a tenant makes, will be paid back in their energy bills.

To find out more about how Green Deal works, visit https://www.gov.uk/green-deal-energy-saving-measures/overview or talk to Approved Green Deal specialists http://www.gas-elec.co.uk/

What next?

The Energy Act 2011 upped the ante and decided to introduce a further requirement which will take effect in April 2018. The proposed changes mean that it will be an offence to let residential, or commercial, properties with an EPC rating of F or G. These are the 2 lowest ratings on a scale of A-G.

The legislation will mean that properties below this rating cannot be marketed until they reach the minimum standards. Is it me or is that hoop getting smaller? The other consideration is how a low rating, even if above the minimum of F in 2018, may affect the marketability and potential rent. Will tenants become more clued up and start rejecting rental properties which have a low rating? Unlikely for now, but this could be a possibility in the future when it becomes compulsory to improve the rating.

Whilst this is still a few years away, now would be a good time to consider whether you will need to improve the energy efficiency of your property to meet the minimum standards, rather than face a delay in finding new tenants when the legislation comes into effect.

If however, the EPC rating cannot be brought up to the minimum standard despite carrying out all recommended measures, then it will be legal to let these properties. Agents and landlords should demonstrate that they have complied with all recommendations and the EPC assessor would note the highest possible rating that could be achieved.

All Energy Performance Certificates state recommended measures to increase the energy rating with estimates of the costs of these works. They range from low cost improvements such as lagging the boiler to more drastic and expensive changes such as wall insulation.

The bottom line

Yes, it's laborious to provide yet another bit of paperwork, but ensuring your property is as energy efficient as possible will make it more appealing to tenants and who knows, maybe they'll stay longer when they can pay less for their energy bills?

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By Sandra Mpouma
13 Mar 2015

Categories: Buy to Let

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