Why landlords should consider energy efficiency improvements

17 September 2020 Kingspan Insulation UK
Landlords

When you’re leasing properties there is rarely a good time to undertake major refurbishment work. Any improvements made whilst a property is vacant will usually prevent it being let, whilst changes to occupied properties require careful negotiation with tenants. Despite this, the introduction of the Minimum Energy Efficiency Standards (MEES) means that many landlords will have already needed to raise the energy efficiency of their properties and more work will be required in the coming years. 

What are the Minimum Energy Efficiency Standards (MEES)?

MEES were first introduced in 2018. They set the minimum energy performance certificate (EPC) rating which rental properties in England and Wales have to achieve in order to be lettable. Since the update on April 1st 2020, they apply to existing tenancies as well as new tenancies and renewals of tenancies. 

Learn more about EPCs.

 

What is the minimum EPC for rental homes in England?

All domestic rental properties which are required to have an EPC (subject to certain exemptions) must achieve a rating of E or better. 
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What should I do if my rental property has an EPC of F or G?

Assuming the property is not covered by an exemption then it is currently in breach of MEES and it is important to act immediately to address its performance. The property must first be assessed to identify the “relevant energy efficiency improvements” that can be made. These can be identified via:
•    an energy efficiency recommendations report (typically accompanying a valid EPC);
•    a report by a surveyor; or
•    a Green Deal Advice Report. 

In practice, these may include fitting a variety of improvements such as insulation, double glazing, more efficient heating sources (including boilers and heat pumps) and renewable technologies. 

You are required to invest up to £3,500 on these improvements. If it is not possible to achieve a rating of E even after these improvements are made, then you must still introduce them and then apply for an ‘All Improvements Made’ exemption via the PRS Exemptions Register.

 

What is the penalty for non-compliance with MEES?

Landlords found to be in breach of MEES can be fined up to £5,000 per property. The standards are enforced by local authorities and they can be applied up to 18 months after the breach was found. 

 

Is it worth upgrading properties above an EPC of E?

Whilst it is not possible for landlords who do not have an exemption to use a grant to meet current MEES requirements, they can use them to get ahead of future changes.

In its consultation on non-domestic private rented properties, the Government stated its preferred option was for all these properties to achieve an EPC of at least a B by 1st April 2030. A consultation on domestic properties is expected soon with the government committed to raising as many homes as possible to an EPC of C by 2030. As such, it can be expected that the MEES requirement for domestic properties will be changed to at least a C by the end of the decade.

If you’re already investing in refurbishments of any kind to a property with an EPC of E or D, it is a good idea to consider if any energy efficiency improvements could also be introduced to raise the EPC of the property now and avoid further disruption and remedial work in the future.

 

Can energy efficiency improvements increase rental value?

A recent government study has shown that raising the EPC rating of a property can lead to a small but significant increase in rentable value.

 

How can I get the best value from energy efficiency improvements?

In order to get the best value from any energy efficiency retrofits, it is important that measures are introduced as part of a ‘whole house approach’. This means getting an expert to carefully assess the property and develop a clear medium-term plan for improvements, ensuring they are relevant to the specifics of each property.  These improvements should also be carefully scheduled to avoid complications and unnecessary additional costs. For example, improvements to the building insulation and draught proofing should typically be made before fitting a new boiler or heat pump as these will reduce the home’s overall demand and may allow cheaper units to be fitted. You can read more about the whole house approach and the new Retrofit Standards Framework which underpins it here