Is it Time to Invest in EPC Improvements for Your Buy-to-Let Property?
Have you been feeling the pressure from letting agencies or potential buyers to make improvements on your buy-to-let (BTL) properties? Or perhaps you’ve been pondering where you stand in terms of energy efficiency regulations? If these questions have crossed your mind, you’re not alone. Navigating the challenges and benefits of Energy Performance Certificates (EPCs) can help you determine your property’s tenant appeal and long-term value.
The Birth of EPCs: Where Did It All Start?
The concept of EPCs was first introduced as part of the EU’s directive on energy performance in buildings. Implemented in the UK in August 2007, the EPC system was designed to help tenants understand the energy efficiency of properties they were considering renting. Each property is rated on an alphabetical scale from A to G, with A being the most energy efficient.
Over the years, the requirements for EPCs have evolved. Initially, properties needed to achieve a minimum rating of E to be legally rented out. Recently, discussions arose about increasing this minimum rating to C by 2025 for new tenancies and by 2028 for existing ones. However, these changes have been scrapped, although landlords are still encouraged to make their properties as energy efficient as possible.
Why Should Landlords Care About EPCs?
EPCs offer tangible benefits for landlords. First, a higher EPC rating can lead to lower energy bills, making your property more attractive to potential tenants who are increasingly conscious of energy costs. Second, properties with better EPC ratings can have higher market values, providing a greater return on investment.
The UK government has also been promoting energy efficiency through various initiatives. For instance, subsidies for energy efficient upgrades and tax breaks for certain improvements can help offset the costs of making your property more energy efficient.
When Do You Need an EPC?
If your property does not have a valid EPC, you will need to obtain one before selling or renting it out. You can get an EPC certificate from an accredited assessor. Failing to have one when required can result in fines. Some properties, such as listed buildings or temporary structures, may be exempt from needing an EPC. However, most rental properties will need to comply.
Making the Necessary Upgrades
With the recent changes and the push towards energy efficiency, many landlords are wondering how to fund these necessary upgrades. This is where popular funding solutions like bridging loans have come in handy for landlords.
A bridging loan is a short-term financing solution that can help you make energy efficiency improvements quickly. These loans are typically faster to arrange than traditional mortgages, allowing you to start your upgrade projects without delay.
Picture this: You have one or more rental properties that are rated between E’s and D’s. You’re uncertain if the legislature will force you to improve those to a level C rating. But that pressure aside, recent surveys have shown that tenants expect more energy efficient homes. Therefore, utilising a bridging loan has been a key way for landlords to upgrade their rental properties before letting them out or deciding to sell.
This has been a popular route for various reasons, one being that it offers speed, allowing landlords not to delay improvement costs and avoid the risk of surging building and labour costs.
A key point to note is that these loans are typically more expensive, which is why you would want to utilise them for a short period before securing a more favourable long-term mortgage. But that’s their beauty—flexibility.
What Improvements Can I Make?
There are various ways to improve your EPC rating. You might decide to install double-glazed windows, upgrade your boiler, or add insulation to improve your property’s EPC rating. If you decide to use a bridging loan, once the work is complete, you can then refinance your property, potentially at more beneficial terms, thanks to your property’s improved EPC rating.
So What Now?
If you don’t feel your properties require improvements, we hope this has been an informative article to help clear up that decision for you. However, if this has made you think you need new EPC improvements – then maybe it’s time to assess your options and find the right support and advice to get the job done fast.
With the right approach, you can make the necessary upgrades swiftly and efficiently. The ultimate goal is to find that ‘sweet-spot’ where you add great value to your tenants’ living experience, and more so your own long-term property value, without breaking the bank.
A few simple EPC improvements can ensure your properties remain competitive and compliant, setting you apart from other rental properties.
Useful Information
When Do I Need an EPC Rating?
If your property does not have an EPC or it has expired, you’ll need a new one before you get your property ready to sell or rent. You’ll need to pay for an EPC from an accredited assessor. Your estate agent may be able to help arrange this. You can be fined if you do not get an EPC when you need one. The person selling the house, the landlord, or the letting agent must show you the EPC if you’re buying or renting.
When You Do Not Need an EPC
You do not need an EPC for:
- Temporary buildings that will be used for less than 2 years
- Stand-alone buildings with total useful floor space of less than 50 square meters
- Industrial sites, workshops, and non-residential agricultural buildings that do not use a lot of energy
- Some buildings that are due to be demolished
- Holiday accommodation that’s rented out for less than 4 months a year or is let under a license to occupy
- Listed buildings – you should get advice from your local authority conservation officer if the work would alter the building’s character
- Residential buildings intended to be used less than 4 months a year
- Places of worship
With the upcoming elections, it remains uncertain what the future holds for EPC regulations. However, one thing is clear: energy-efficient properties are in high demand. By staying at the forefront of these demands, you can ensure your properties remain attractive and compliant, positioning yourself for long-term success.