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Let’s provide some background: An energy performance certificate (EPC) is a certificate that shows how energy efficient a property is. The document shows a breakdown of the property’s energy performance as well as any steps that could be taken to improve the property’s energy performance including the potential savings that could be made.
How could EPCs affect your property portfolio?
The minimum energy efficiency level for domestic private rented properties is set by the Minimum Energy Efficiency Standards (MEES). Since 2018, it has been a legal requirement that all properties which are rented out must have an EPC of E or above.
In 2019, a report concluded that 62% of privately rented properties had an EPC between D to G and therefore need to have improvements made to them if the landlords want to continue letting the properties. This number is further supported by lenders’ own data which shows they have an average of 63% of their mortgages written on properties with an EPC below C.
When are the regulations changing?
As of 2025, all properties let under new tenancy agreements must have an EPC of C or above. This will then be extended to all currently rented properties by 2028, unless the property is not required to have an EPC.
How will landlords finance these improvements?
The year 2025 will soon be upon us, so it is important to start planning for these future regulation changes. Research from Paragon Bank shows how landlords intend to source the funds for EPC upgrades.
- 60% of landlords said they would use their savings
- 27% are considering putting up the rent
- 19% would opt for a government grant or funding, if available
- 15% said they will use a further advance from their mortgage lender or release equity from their portfolio. The appropriate time would be after a fixed-rate product comes to an end.
Will Landlords be able to afford these improvements?
The regulations recognise that there are a large number of properties currently rented out dating back to being built before 1919, and therefore it is not cost-effective to improve them to an A-C rating without significant costs. One of the exceptions relates to the cost of improvements totaling between £3,500 – £10,000 inc VAT; this figure has not yet been confirmed and is subject to the publication of the legislation. The government has a dedicated page outlining these exemptions which last 5 years before they need to be reapplied for.
Further exempt properties:
- Listed properties where the minimum energy performance requirements would unacceptably alter it
- A temporary building which will only be used for 2 or fewer years
- A building used as a place of worship or for other religious activities
- A detached building with a total floor space under 50 square metres
- If the building has planning permission to be demolished
- Houses of multiple occupations (HMOs) which have shared facilities, communal areas and entrances
How have landlords reacted to these changes?
New EPC regulations have made landlords reconsider future plans with their property portfolio, as they face change and extra costs.
- 33% of landlords said they would carry out works at the minimum cost required to comply, and continue to let the property out
- 21% said they wouldn’t carry out any work and either sell the property or not re-let it
- 15% will carry out the works that maximise the long-term value of their property and continue to let out
- 10% were unsure what they would do or hadn’t thought about it
- 21% said they would go with another option
Further exemptions and how to apply can be found on the government website. Guidance on PRS exemptions and Exemptions Register evidence requirements – GOV.UK (www.gov.uk)
See how having an EPC can benefit you financially. Benefit Financially by Improving your EPC Rating (advocatefinance.co.uk)
How can Advocate Finance help you?
Do you have a property that you wish to refinance onto a green product? Or to capital raise funds for property improvements? Get in touch, as we may be able to help you.
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