"Even at this stage it may be worthwhile for a landlord to invest up to £10,000 (and perhaps more) if that would get their property an EPC rating of C or higher."
Tenants who may already be struggling with higher energy bills face a further hike in their costs in the autumn. They will be grateful for anything landlords can do to help with their household finances. Meanwhile, the benefit for landlords is that any support they can provide may mean that tenants are less likely to fall behind with their rental payments or perhaps consider looking for a new home that might have lower heating costs.
Landlords investing to improve their properties may therefore find that they can attract and hold on to more reliable tenants in the longer term, and perhaps suffer fewer void periods. And as energy costs continue to rise, those landlords that can help keep utility bills in check may see stronger capital growth as the value of their rental property rises over time.
New rules mean that most rented homes for new tenants will need to have an energy performance certificate (EPC) rating of C by 2025, and this will apply to existing tenancies by 2028. But there is cap on what landlords are expected to pay to achieve the required rating, and those landlords facing higher costs may be able to apply for an exemption. Even if they qualify for this exemption, however, it lasts only for a fixed five-year period, and after that they may have to pay for even more expensive environmental improvements.
Minimum energy efficiency regulations allow landlords to register their property for an exemption if they can prove that the cost of making the cheapest recommended improvement is more than £3,500. Under new proposals, however, this cap looks set to be raised to £10,000, although this higher sum will be a limit on the total investment required to bring the property up to standard, rather than the existing £3,500 limit that applies to the cost of individual improvements to raise environmental standards.
This could mean though, that even at this stage it may be worthwhile for a landlord to invest up to £10,000 (and perhaps more) if that would get their property an EPC rating of C or higher. By investing now, the landlord could enjoy the benefits of upgrading the property and improving its environmental performance – and accompanying lower energy bills – sooner rather than later.
Mortgage finance can help landlords improve the environmental performance of their properties. Costs could be spread over an extended period, perhaps as part of a remortgaging package, and improving a property’s EPC rating could also mean that landlords qualify for a green mortgage at a more attractive borrowing rate. But the individual circumstances of landlords – and their properties – will vary, so they may wish to seek advice from suitably qualified professionals to explore their options.
