"By 2028, rental properties will have to meet a minimum EPC rating of C. A move which puts energy-saving refurbishments close to the top of a landlord’s to-do list."
For a landlord or property professional, a light refurbishment generally entails decorating, installing new kitchens and bathrooms, upgrading windows, doors and flooring, alongside rewiring and replacing wasteful central heating systems with more energy efficient solutions. Internal re-configuring may also be acceptable as long as the work is of a non-load bearing nature, i.e., doesn’t require building regs.
Sounds simple right?
While upgrading investment properties might sound relatively straightforward from a practical perspective, this isn’t always the case from a longer-term funding standpoint. However, with the introduction of new laws and incentives designed to improve the energy efficiency of UK housing stock, innovations in property finance are becoming increasingly important, especially for landlords.
On 1st April 2020, the rules on Minimum Energy Efficiency Standards changed to require all rental properties to have an EPC rating of E or above. For the most part, landlords successfully navigated these requirements, but further proposed legislation suggests that the rating could be tightened such that, by 2028, rental properties will have to meet a minimum EPC rating of C. A move which puts energy-saving refurbishments close to the top of a landlord’s to-do list.
Energy efficient properties are fast becoming ‘must-haves’ for homeowners, landlords and tenants from a cost and environmental perspective. This is being reflected in the growth of the green mortgage market but there are other product types which can be utilised to get properties up to scratch in a shorter timeframe which works for the longer-term.
Enter the concept of Refurb IN Term. This is a special type of buy-to-let or semi-commercial mortgage which bypasses bridging and simply allows the landlord to purchase and quickly renovate a tired property within three months using long-term product/rates. When launching Refurb IN Term last November, it quickly resonated with our intermediary partners. Landlords like it because of its convenience in terms of saving them time and refinancing costs and brokers have welcomed it because it demonstrates their ability to source both innovative solutions as well as more traditional funding options.
Going forward, identifying circumstances where Refurb IN Term might be a suitable solutions will be key for brokers. To qualify for HTB lending, first and foremost, the property must be habitable on purchase and any proposed refurbishments should be light. In fact, using Refurb IN Term is a great option for smaller projects where the anticipated uplift does not warrant the cost of bridging finance. For example, upgrading the kitchen and bathroom in a standard buy-to-let to increase the rental income potential, or making small but specific changes to a licensed HMO to attract a different type of tenant. It could even be a good solution for landlords who have longer term plans to extend a property but in the short-term, are happy to give it a quick refresh so that it can be let out for a couple of years whilst the relevant planning permissions are being obtained.
Like any specialist product type this won’t be suitable for every lending scenario or every client but it’s all providing borrowers with access to a range of options. And when it comes to any refurbishment or DIY project, my option is to always draft in the professionals.
