If you’re planning on renting out property in the UK, are you fully aware of your obligations around Energy Performance Certificates (EPCs)?
These documents are legal requirements for most private domestic and non-domestic rentals and sales, though exceptions do apply.
Usually, they’re straightforward. But there are a few areas of the law where residential landlords might get confused – and the penalties for breaching the regulations can be steep.
So, we’ve put together a guide to EPCs for private residential landlords, covering how to get an EPC, how to improve your EPC rating, and which types of properties and tenancies require them.
Read on to find out more, and to discover how to protect your rental properties with commercial insurance for landlords
What are EPCs?
An EPC is an official assessment of the energy efficiency of a building. It helps prospective tenants (or buyers) understand how much it would cost to heat and light your property.
It awards homes and other properties a rating on a scale from A (very energy efficient) to G (not very efficient). This is displayed in a traffic light system, shaded between A as deep green, D as yellow, and G as red.
As well as the current rating, the EPC features the potential score if improvements are made.
To let a self-contained property in the UK, it must normally be rated E or above, although see below for exemptions. The average property is a D, though new builds should score more highly.
Your EPC is valid for 10 years. It is entered onto the official EPC Register
, which can be searched online. If there’s already one in place for your property, you don’t need to get a new one until the expiry date. And if you’re not planning on selling or letting your building, you don’t need to get an EPC.
The government’s EPC webpages
are a great resource for this topic.
How is the EPC assessed?
The assessment is carried out by an accredited energy assessor, who will visit your property and inspect every room, including looking at the loft space if possible.
They will measure the size of your rooms, and note down factors such as the age of the building, the construction materials used, the type of lighting and heating, if the windows are double glazed, and if there is any insulation or draught proofing installed.
The assessor will also ask questions to clarify things that aren’t apparent from the inspection, such as cavity wall insulation or under-floor heating. If you’re not present during the inspection, it will be assumed that you haven’t installed them.
The duration of the inspection depends upon the size of your property. Afterwards, you’ll receive your report, including an overall score and rating plus recommendations for improvement.
The process is not without controversy. For example, many landlords and home owners complain
that mains gas scores better than alternatives such as Liquefied Petroleum Gas (LPG), which is generally considered efficient and low carbon. However, as LPG is more expensive than mains gas, it is marked down in the EPC process.
This has a negative impact on rural homeowners, whose only option may be LPG – and is especially frustrating for people who live off-grid for environmental reasons.
What recommendations might be included in an EPC document?
In addition to the certificate, you’ll be issued with a 10-page EPC document, which includes recommendations for improvements.
It covers the likely cost of any measures, and the potential savings in pounds over a three-year period if you carried them out.
Easy measures you can take include replacing light bulbs with energy efficient ones, removing any electric heaters used as secondary sources of heat, and reducing water usage.
More expensive improvements might include installing triple glazing or solar panels or replacing the boiler with an energy efficient type.
You might be able to get government grants or other funding, for example from energy companies, to help you meet the costs of improving your property’s energy efficiency.
There’s no obligation to carry out any of these recommendations, unless you’re trying to raise your EPC rating, but they could save you money in the long term.
When making any significant changes to your property, remember to ensure they’re covered by your landlord insurance
What are the requirements of landlords?
EPCs have been a legal requirement on most domestic and commercial properties for rent or sale since 2008.
The laws were strengthened by the introduction of the Minimum Energy Efficiency Standard (MEES) Regulations. From 2018, new tenancies have been permitted only on properties with a rating of E or above.
Since April 2020, the regulations have been even stricter: domestic properties must have a rating of E or above even if there has been no change in tenancy. For commercial properties, this will come into force in 2023.
There may well be further changes in the coming years to raise the minimum standards permitted, as the government tries to achieve carbon reduction goals.
What are the penalties for not having an EPC?
Your local authority oversees enforcing the MEES regulations. It can carry out checks and serve landlords with compliance notices if it believes they have not met the MEES conditions.
These compliance notices request further information. Landlords who are then confirmed to have breached the regulations are likely to face penalties.
The maximum fines that local authorities can impose are £2,000 for domestic private properties rented out for less than three months, and £3,000 for over three months.
If you provided false or misleading information on the PRS Exemptions Register, you could be fined up to £1,000. For failure to comply with a notice, the maximum penalty is up to £2,000. In total, you could be fined up to £5,000 per residential property.
In all cases, the local authority can publish details of the breach for up to 12 months. This can be instead of a fine, or in addition to it.
For commercial properties, fines may be calculated as a percentage of the rateable value.
Whose responsibility is it to get one?
If you are letting your residential or commercial property, you need to get an EPC and be prepared to show it to a prospective tenant on request. You should also include the rating in any commercial advertising.
Ideally, you should get your EPC before your property goes on the market, or within the first week. If you haven’t got one within 28 days, you need to remove your property from the market. Your property cannot be marketed until an EPC is in place or has been commissioned.
It is the landlord’s responsibility to get an EPC. If you’re using letting agents, they may offer to handle the process for you, but you can often find a cheaper assessor yourself.
It’s not hard or expensive to get an EPC – it’s just one of those essential documents you need to have in place, along with quality ommercial insurance
What are the penalties for not showing the EPC?
All prospective tenants have a right to see the EPC if they ask. You must show it to them free of charge at the earliest opportunity.
You can refuse to do so only if you believe they have no intention of renting the property; they couldn’t afford the rent; or you have no intention of renting it to them.
Otherwise, you risk a fine of £200 for a domestic property. For a commercial property, the fine is 12.5% of the rateable value, with a minimum of £500 and a maximum of £5,000.
Enforcement agents also have a right to see the EPC, and you could be liable for criminal prosecution if you obstruct them in their duties.
When tenants move in, or renew their agreement, you should give them a copy of the EPC certificate, your Gas Safe certificate, and the government’s How to Rent guide. It’s in your interests: failure to do so means you wouldn’t be able to evict them under a Section 21 “non-fault” eviction notice.
Types of tenancies where an EPC applies
You’ll need to ensure you’ve got an EPC in place for most domestic tenancy agreements, including assured, regulated, or domestic agricultural tenancies.
The main exceptions are many holiday cottages, hostels, emergency council accommodation, tied accommodation, and rooms for lodgers in your own home.
If you have a domestic property which you let out as individual rooms, with separate tenancy agreements for each occupant and certain shared facilities, you don’t need an EPC. This is because the accommodation is not self-contained.
If you rent out the whole property to a family, couple, or house-share group on one tenancy agreement, however, you do normally need an EPC.
Which properties do not require an EPC?
Some domestic and non-domestic properties for rent or for sale are exempt from the EPC requirements.
These include: holiday or residential buildings used for less than four months per year, or let under a licence to occupy; stand-alone buildings with total useful floor space of less than 50 square metres; temporary buildings that will be used for less than two years; certain industrial and non-residential agricultural buildings that don’t use a lot of energy; some buildings that are due to be demolished; and places of worship.
Listed or other buildings of historic importance may be exempt if the work needed to make them energy efficient would damage their character or appearance. Your local authority conservation officer can advise.
What other exemptions are there?
Landlords can also apply to place their properties on the Private Rented Sector (PRS) Exemptions Register if certain conditions apply. These essentially involve demonstrating that the recommendations for improvement within the EPC are unworkable.
One valid reason is that wall insulation was recommended on the EPC, but it would be detrimental to the property. Another is that the recommended measures would reduce the value of the property by 5% or more.
If a third party such as a planning authority, a mortgage lender or a tenant withholds consent, for example to install solar panels, that is grounds for an exemption.
Where there are no improvements that can be made, or all the recommendations have been implemented but the property still falls below an E rating, it can be declared exempt.
For domestic properties only, landlords can apply to go on the PRS Register if it would cost more than £3,500 to make even the cheapest recommended improvement.
For commercial properties only, there’s a ‘7-year payback test’. If the savings from reduced energy bills are expected to be less than the cost of implementing the measures, the property can be exempted.
In all cases, documentary evidence – quotes and statements from professionals – will be required. Exemptions are generally for five years. After that time, the landlord must try again to improve the building’s energy efficiency.
Which landlords are exempt?
There’s also a grace period of six months for people who become landlords suddenly.
This might apply if you buy a house with sitting tenants. Another possible reason is if you are acting as a guarantor for a tenant who then becomes insolvent. You then take over the lease, and become the landlord for that tenant.
There are various other complex scenarios in which you might unexpectedly become a landlord, so get legal advice if you’re concerned.
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Just call to get a quick quote for commercial insurance today.Policy benefits, features and discounts offered may very between insurance schemes or cover selected and are subject to underwriting criteria. Information contained within this article is accurate at the time of publishing but may be subject to change.