Since April 2018, landlords in England and Wales have only been able to contract new tenancies if the property in question has an energy performance rating of E or better. A further statutory instrument has been passed which specifically addresses the situation of landlords who are unable to access financing to improve their properties to meet the minimum energy efficiency requirements.
Liability is capped at £3500 (including VAT) per property
Landlords without access to third-party funds will be required to spend a maximum of £3,500 (including VAT) to bring it up to the required standard. In reality, however, assuming landlords are sticking to fairly modern, standardized properties, the cost is likely to be much lower than this. In fact, according to the Residential Landlords’ Association, a more realistic expectation would be in the region of £1200.
Small, affordable actions may be all that’s required
It is very likely that a significant percentage of landlords will have energy performance certificates for their properties, in which case there will be a list of suggested improvements (assuming the properties fall below the maximum standard). If the property is close to the necessary E rating, something as simple and cost-effective as installing energy-efficient lighting may be all that is required to move the property up a band. Improving insulation can also deliver excellent value for money (and effort).
Remember that insulation degrades over time (albeit slowly, at least if it’s high-quality insulation) so updating it can make a real difference to your energy rating. Similarly, extending the insulation into new areas is another way to make a significant improvement at a relatively low cost. For example, loft insulation is fairly standard, but quite a lot of heat can be lost through floors as well so insulating them may be a very worthwhile exercise.
“Smart” appliances may not bolster your EPC but may still be a worthwhile investment
If you need to update your property anyway, you may want to take the opportunity to opt for smart appliances, especially lights. As yet, this will not bolster your EPC (although smart lights are energy-efficient lights which will help) but they are likely to be a draw to potential tenants.
Similarly, the fact that EPCs focus on “core” household functions, namely heating and lighting means that installing energy-efficient appliances such as washing machines will not (currently) help to improve your official energy-efficiency rating, but again, it may appeal to environmentally-aware (and financially-astute) potential tenants.
Existing cost-based exemptions will only be valid until March 2020
Although it is highly likely that most rental properties are already compliant and that those which are not can probably be made so fairly easily, some landlords will have older and/or atypical properties, such as properties in rural areas which use non-standard fuel, may be effectively impossible to upgrade (at least in any sort of cost-effective manner). Landlords can still obtain exemptions for these properties but will need to make a point of applying for them as their existing exemptions will only apply until March next year.
Hopwood House are specialists in UK property investment, with a wide range of investment opportunities including student properties and buy-to-let in Manchester, Liverpool, Sheffield and Leeds.