The government’s backtracking over the introduction of energy performance targets for property let out in England and Wales is facing criticism, but it will be welcome news for landlords with older properties deemed too expensive or difficult to upgrade.
Let property must currently have an energy performance certificate (EPC) rated E or above. Without this, the property cannot be legally let regardless of whether the tenancy is an existing one, a renewal or a new let. The government’s intention was to raise the EPC requirement to C or above by 2028.
The penalty for not having a valid EPC is £5,000. Under the now scrapped proposals, the penalty was going to be £30,000.
The cost of moving from a D or E rating to a C would typically be in the region of £10,000 to £20,000. There were reports that the government would have covered anything over £10,000, but that would still leave a significant burden for many landlords. As capital expenditure, most upgrades would not even have qualified for tax relief against rental income.
- Raising energy efficiency to the required standard might have required improving insulation, installing double glazing or replacing old gas boilers.
- However, it would have been very difficult, if not impossible, to bring some older properties up to an EPC C rating.
One concern considered by the government was that costs would have been passed on to tenants by way of higher rents.
Although new EPC rules are off the agenda for now, there is every chance this could change if Labour wins the next election. Regardless of future changes, however, landlords should be aware that a good EPC rating makes a property more attractive to tenants given current high energy costs.
For Scottish landlords, it looks as if the Scottish Government still intends to go ahead with a move to an EPC C rating by 2028.
A useful guide to energy performance certificates can be found here.