Customisable business insurance
Landlords across the length and breadth of the UK have a large number of responsibilities, including the need to ensure they have an up to date Energy Performance Certificates (EPC) for their rental property.
But understanding the ins and outs of this important piece of paper can be complex, especially as the rules surrounding EPCs for rental properties are going through a period of change. Here, we break down what EPCs are, what the current rules are, how they're changing and what this means for landlords.
What is an Energy Performance Certificate?
Most buildings in the UK should have an Energy Performance Certificate to indicate its level of energy efficiency. Using a scale of G (least efficient) to A (most efficient), an EPC rating is worked out using a system of points and calculations called the Standard Energy Procedure (SAP).
Together the SAP and EPC are important metrics in displaying how energy efficient a property is for tenants or prospective buyers.
EPCs are valid for 10 years, at which point they must be renewed via an inspection by an accredited assessor. You can find accredited assessors in your local area for England, Wales and Northern Ireland, or via a separate system for Scotland.
It's always the responsibility of the property owner to ensure that the property’s EPC is up to date if you intend to either sell or let the property.
How do EPC ratings work?
During an assessment, several elements of a building will be inspected and given a score according to the Standard Energy Procedure (SAP) calculations and this will determine where on the A to G scale the building sits. The elements inspected include the property’s:
- Level and quality of insulation
- Heating and cooling systems
- Construction materials
- Renewable energy sources (such as solar panels or heat pumps)
The assessor will give a property a score out of 100, with the EPC rating determined by the SAP score:
|A (most energy efficient)
|C (legal minimum from 2028)
|E (current legal minimum)
|G (least energy efficient)
According to ONS data, as of 2022, the average SAP score was 67 in England and 65 in Wales, both equating to an EPC rating of D.
What’s the difference between a ‘current’ and ‘potential’ SAP score?
Every EPC will include two SAP scores, one ‘current’ and one ‘potential’, along with a series of recommendations to improve energy efficiency, which might include:
- Installing energy-saving light bulbs
- Improving insulation
- Upgrading heating systems
In simple terms, the current score shows the property’s actual energy rating at the time of the inspection, with the potential score showing what score could be achieved if the recommendations listed were actually implemented.
How can I find my property’s EPC rating?
If your property is in England, Wales or Northern Ireland, then you can easily search for the EPC certificate by postcode using the government’s register, or using the EPC register for Scotland if you're north of the border.
Exemptions from EPC rating rules
Most properties in the UK fall under the rules regarding EPCs, however there are certain exemptions, including:
- Listed or ‘officially protected’ buildings where meeting the minimum EPC rating would unacceptably alter the protected character of the building
- Temporary buildings in use for two years or less
- Workshops or non-residential farm buildings that use very little energy
- Any small detached building with a floor plan of under 50 square metres
- Buildings that are due to be demolished by the landlord, with relevant planning and conservation permissions in place
- Buildings that are used as a place of worship.
What are the current EPC rules for landlords?
The current rules around Energy Performance Certificates can be boiled down to three main responsibilities for the landlord:
- You must have a valid EPC for any property that you are planning to sell or let to tenants
- Display the EPC (or make it available free of charge) to any prospective tenant or buyer
- Ensure the property has a rating of E or higher (if it's in England or Wales)
In 2018, the rules around EPCs changed in England and Wales. Rental properties are now required to have a minimum EPC rating of E. But this law doesn't currently apply in either Scotland or Northern Ireland.
For properties in England and Wales, if the building does not have a rating of E or above, then you are not legally allowed to put it up for sale or advertise to let it out to tenants. You must take steps to improve the EPC rating, such as adding insulation or upgrading heating and cooling systems, then have an assessor re-inspect the property and issue an new certificate.
There is currently a cap of £3,500 on the cost of improvements to reach an EPC rating of E or better. If the work required to improve the rating will cost more than £3,500, then landlords should make all the improvements they can up to that amount and then register an ‘all improvements made’ exemption.
The penalty for not displaying a valid certificate is £5,000 in England and Wales, or £500 in Scotland.
How are the EPC rules are changing?
In 2022, it was announced that from 2025, new tenancies would have to have a minimum of a C rating, with all tenancies coming into line from 2028. This timetable has now changed such that all properties will need to be C rated or above by 2028 in England, Wales and Scotland.
This means that from 2028 onwards, all private properties (other than those with exemptions) in England, Wales and Scotland will have to an EPC rating of C or above (a minimum SAP score of 69 out of 100 or more) in order to be sold or let to tenants.
How will the rule changes affect landlords?
The average EPC rating for the private rental sector in England and Wales is D, which falls below the C rating that will be required by law from 2028 onwards.
There has been a lot of speculation about how much it will cost landlords to make the required changes to their properties, and whether the burden of additional costs will mean many landlords will choose to sell their property before 2028 rather than commit to the necessary improvements.
How much do energy efficiency improvements cost?
Currently, the cost of improving your EPC rating to the mandated minimum of E is capped at £3,500, but this cap is being lifted to £10,000 from 2028, meaning more landlords will have to spend significantly more money to become legally compliant. The UK government estimates that the average cost for landlords to reach an EPC C rating is around £4,700.
There are funding opportunities out there which can help with the cost of making major improvements to your property’s energy efficiency. The UK government’s Boiler Upgrade Scheme includes funding for grants of £5,000 or £6,000 (depending on your situation) towards the cost of installing a heat pump to replace your old gas boiler.
This is a significant government contribution, however the total cost of installing a heat pump is much higher. Air source heat pumps can cost between £7,000 and £14,000 to buy and install, whereas ground source heat pumps can cost anywhere from £15,000 to £35,000.
How will the rule changes affect tenants?
The biggest effect of these rule changes for tenants will be a reduction in the cost of their fuel bills thanks to the improved energy efficiency of their home.
According the calculations by The LENDERS project, a typical family home (a three-bedroom house with four residents) with an EPC rating of E can expect to pay £1,959 a year on average for their fuel bills.
With an improved EPC rating of C, this fuel bill cost drops to an average of £1,439 a year – an annual saving of £520. If the EPC rating were improved all the way to A, then the average cost of fuel bills would drop to just £751 a year – a saving of £1,208 (or a 62% reduction)
However, it is important to note that the work to improve a property’s EPC rating can cost landlords a significant amount of money. Research conducted by Shawbrook Bank shows that more than half of landlords would consider passing at least some of the cost on to tenants through rent increases.
While improvements to your property to meet new EPC rating requirements can cost a significant sum of money, landlords could benefit from landlord insurance, in order to cover expensive claims and repair costs in the event of unexpected damage.
How to improve your property’s EPC rating?
There are several ways in which landlords can make improvements to their property to increase its overall energy efficiency and reach a higher EPC rating. Some are small, incremental improvements while others require significant work.
1) Insulation – improve insulation in the walls, roof and floors of your property. This helps to reduce heat loss and lowers the need to use additional heating to keep the property comfortable.
2) Windows and doors – upgrade to double or triple glazing to improve thermal efficiency and ensure that existing windows and doors are properly sealed to prevent drafts and unwanted heat loss.
3) Heating system – install an energy-efficient heating system, such as a heat pump.
4) Lighting – replace your property’s old light filament bulbs with energy-saving LED bulbs, which are more efficient and have a longer lifespan.
5) Renewable energy – install renewable energy technologies, such as solar panels or wind turbines. Generating your own clean electricity can contribute to a higher EPC rating.
6) Ventilation – installing energy-efficient ventilation systems can help maintain good air quality and prevent issues like condensation.
7) Smart controls – installing smart thermostats and energy monitoring systems can allow the residents to control and optimise their energy usage.
You may also like:
Download your free landlords' guide
It's quick, instant and unlocks 39-pages of valuable advice for new and aspiring landlords.
This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
We've made buying insurance simple. Get started.
- 18 May 20235 minute read
The UK government has introduced a Renters (Reform) Bill, committed to abolishing Section 21 'no-fault' evictions, to parliament. Here we break down what this means for landlords.