Changes to Rental Sector
After what seemed to have been an eternity of uncertainty, the Energy Performance Certificate (EPC) regulations have officially been finalised by the Department for Energy and Climate Change (DECC). The changes, which are due to come into effect in April 2018, will mean that it will be unlawful to let or lease a residential or commercial property with a poor rating. The Minimum Energy Efficiency Standard (MEES) was introduced in March 2015 and will now be the basis of whether a building is unlawful or not.
Here are the 5 things you need to know;
1. Both commercial and residential properties will be affected under these new rules, within the private rented sector but there will be some exemptions.
2. As expected, both sectors will be liable under the changes within the private rented sector – it will be unlawful for a building not to meet the new minimum EPC rating before it is rented out. There will be some exemptions;
• Tenancies less than 6 months or longer than 99 years
• When all relevant improvements have been completed, or any further improvements would not have a payback of 7 years or less through energy savings – this will need to be assessed by an independent party
• If any improvement measures are likely to reduce the market value of the property by more than 5%
• Where consent for improvements has been rejected by tenants, a superior landlord or planning authorities
3. Non-domestic buildings will be required to reach an EPC rating of ‘E’ or above.
4. The new EPC rating will be based on the CO² emissions for the property, which is displayed in a graph on the first page of any performance report. In the 2015 UK Report into Greenhouse Gas Emissions, 17% of the total emissions were recorded from the business sector.
5. Domestic buildings will be required to reach an EPC rating of ‘E’ or above.
The new rating for this sector will be based on fuel costs rather than CO² emissions for the property – most likely something easier to relate to and compare against for prospective new tenants.
In 2016, the average electricity bill in the UK had risen to £586, according to a government report.
UK building stock could face several problems.
For properties unable to reach a rating of ‘E’ on the EPC scale, there’s going to be problems – and unfortunately, there’s a lot of them. Between 2008 and 2015, 35% of non-domestic buildings had an EPC rating of E-G. For the same period, 25% of domestic properties were rated E-G.
The new regulations will come into force from 1 April 2018 and all eligible properties will be required to be improved to a specific minimum standard.
For any buildings unwilling or unable to reach the minimum requirement, there will be penalties – enforced by the Local Weights & measures Authorities (LWMA). The penalty for renting a property for less than 3 months in breach of regulations will be equivalent to 10% of the property value, subject to a minimum amount of £5,000 and maximum of £50,000. After the three-month period, the penalty increases to 20%, with a minimum of £10,000 and maximum of £150,000 possible.
How can you improve your EPC rating?
Although the changes will differ in scale for domestic and non-domestic properties, they still follow the same principle. We’ve outlined the most common changes you can make to your property to improve its EPC rating;
Lighting – A simple and inexpensive first step is to replace existing halogen and non- low energy lighting with compact fluorescent lights and LEDs.
Roof Insulation – Ensuring that your lost insulation is at least 270mm in depth is another inexpensive improvement and if you currently have insulation less than 90mm, funding is available.
Wall Construction – This has a huge bearing on the final EPC rating of your property and if you have cavity wall construction, you should make sure it’s filled.
Heating Controls – Even for older boiler models, installing modern heating controls such as room thermostats, individual radiator valves and a boiler programmer could have a positive impact on your EPC results. It could make more sense to upgrade your older boiler though and is worthwhile looking at.
Renewable Technologies – The possibilities of renewable systems are endless and range from electrical installations (solar photovoltaic) to heating and hot water (solar thermal, biomass and heat pumps). These systems are currently incentivised through the government and provide not only a tariff based on your generation, but come with their own set of energy savings.