Energy efficiency proposals for buy-to-let scrapped

There has been a lot of talk this past week about the environmental policies dropped by Rishi Sunak as he pushed back the UK’s net zero carbon emissions goals. Amongst the policies scrapped was the proposal that all rental properties would need to have a ‘C’ energy efficiency rating from 2028 (previously delayed from 2025) via their EPC (Energy Performance Certificate). 

If you’re unfamiliar with EPC’s, they show a property’s energy efficiency on a scale from A (highest) to G (lowest). They are valid for ten years and you can easily look-up a property’s certificate online by visiting www.epcregister.com.

Whilst every rental property has needed an EPC since 2008, from April 2018 it became unlawful for new tenancies or tenancy renewals to proceed in a property with a rating lower than an E. From 1st April 2020, these rules expanded to ALL tenancies i.e. no property with an EPC rating below an E should currently be tenanted (although some exclusions apply). Those who fail to comply with these laws face significant financial penalties; from £5,000 all the way up to £150,000 for repeat, long-term offenders.

Updated lettings legislation also stipulates that if you don’t provide the EPC to your tenant before they let the property, you are unable to serve them with a Section 21 notice should you want to regain possession of the property.

It is therefore a good idea for landlords to check their property has a valid certificate in place with at least an E rating and that the tenants were given a copy before any tenancy agreement was signed after 2020. If you use a letting agent, be sure they are on top of this for you, as ultimately it is the landlord that faces the consequences (and fines) for not abiding by the legislation.

It should be noted, that legally the EPC is only needed at the point of marketing and the start / any renewal of the tenancy. So, if the EPC expires during the tenancy, it doesn’t technically need to be renewed straight away. This is something of a grey area though, as how can you prove the property satisfies the minimum E rating if you don’t have an in-date certificate? Also, you need a valid EPC to be able to serve notice to tenants, so it is wise to have one in place in case this becomes necessary.

Until last week, most landlords accepted that more stringent energy efficiency rules were a given, with some having already spent sizeable sums in preparation for the anticipated legislation. A study by Shawbrook Bank suggests 80% of landlords were already prepared for the 2025 EPC rule change (although that suggests around 550,000 landlords weren’t!).                                                                                                                                                    This effort and expenditure might not all be in vain though; it is likely the minimum rating will be increased at some point in the future. Indeed, the Labour and Liberal Democrats parties have already said they will reverse these reversals if they get the opportunity…meaning the need for a C rating by 2028 could still become a reality if they come to power (a General Election is due next year…).                                                                                                                      Besides, improving the energy efficiency of your buy-to-let not only has a benefit to the environment but also to your tenants. Rising energy prices in the past couple of years has focused the minds of many, such that tenants are now taking note of the EPC rating prior to choosing a property. Previously, so few people paid attention to the EPC that there was little value in improving the energy efficiency of the home, nor to then instruct and pay for another assessment to prove it. 

Similarly, the value of the property should benefit from being more energy efficient; with 74% of those looking to purchase within the next two years advising that a home with an EPC rating of an A or B is more attractive than less energy efficient homes. There are also a growing number of ‘green’ mortgage deals, with incentives or improved terms reserved for those with the most energy efficient homes.

So, although the ‘stick’ of having to ensure all rental properties meet at least a C rating rather than the current E rating on the energy efficiency scale has gone, there are a growing number of ‘carrots’ as to why landlords may wish to adopt this regardless. This seems sensible to me, as there were some homes (e.g. older, solid brick properties, which have stood the test of time despite their perceived shortcomings) that simply required too great a cost to warrant the works (which could also cause damp and defects to the property). 

For now, the scrapping of the energy efficiency proposals should mean there is one less reason for landlords wishing to sell their property. This is especially true for those with older housing stock, who feared the cost implications for them to meet the standards was simply not worthwhile, perhaps showing the proposal in its original form was unrealistically simplistic with its ‘one size fits all’ application.

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