Insulate your property portfolio to avoid the burn
Energy efficiency is set to move up the agenda for landlords, whether for residential or commercial property. This is because from 1 April 2018 it will become unlawful to let out property – either through a new lease or renewing an existing lease, which has an Energy Performance Certificate (EPC) rating less than E. This means that it will be illegal to rent out properties with an F and G EPC rating.
Minimum Energy Efficiency Standards (MEES) were introduced in the Energy Act 2011 with the intention of boosting the energy efficiency of residential and commercial properties. It is estimated that 10% of residential properties and 18% of commercial properties have an EPC F and G rating and are deemed substandard under the terms of the act. The act’s key deadlines are as follows:
- 1 April 2018 – illegal to rent with a new lease or renew an existing lease for commercial or residential properties below an EPC E rating.
- 1 April 2020 – illegal to rent any residential property below an EPC E rating – rule does not just apply to new lettings.
- 1 April 2023 – illegal to rent any commercial property below an EPC E rating – rule does not just apply to new lettings.
Enforcement of these new regulations will be by Local Weights and Measures Authorities, which will be responsible for imposing penalties. For a residential property, this can be £4,000 while for a commercial property the fine can be up to a maximum of £150,000.
As MEES are based on EPC ratings, landlords need to ensure that they are accurate. Some older EPC ratings were done based on different criteria to current EPCs. Furthermore, old EPCs will not take account of any improvements made to the property. This means landlords are best advised to get new EPCs on their F and G rated properties as this will provide information on how they can be improved. And it is not just about avoiding fines. The values of properties with poor EPC ratings are lower as investors consider such properties are a greater risk.
There are some exemptions to MEES, including:
- Listed buildings and those in conservation areas might be granted an exemption in the case of buildings where compliance with EPC requirements would ‘unacceptably alter the character or appearance” of a building.
- Denial of consent to improve the building: for example, where the landlord is required to obtain consent/permission from a third party to undertake the relevant improvements to a minimum standard, or the landlord requires the consent of the tenant, who withholds the consent.
- Measures to improve a property are evidenced by a suitably qualified surveyor to cause a capital devaluation of more than 5%.
When it comes to improving energy efficiency, landlords can undertake work providing relatively quick wins at not too a great a cost. Examples are given below:
- Most of a building’s heat is lost through poor sealing of doors and windows and through poor insulation in the roof and walls. Checking and renewing or adding new window and door seals can eliminate drafts, while insulation, if missing in attics can be installed or existing insulation thickened to reduce heat loss from roofs. Cavity wall insulation should also be considered, but this can be disruptive to install.
- Installing low energy lighting – LED spots and/or compact fluorescent lights, which fit into existing light sockets are quick and easy to install. In common areas such as hallways or toilets of commercial buildings PIR sensors enable lights to be activated only when people are present.
- The installation of modern compact combi boilers which are considerably more energy efficient should also be considered.
- Consider installing a smart meter. You can see the effect of reducing energy immediately via your smart energy monitor which will help you to make better choices and start saving money. Plus you'll receive accurate bills without submitting a meter reading as your smart meter will send us regular and accurate readings of your energy usage automatically.
With April 1st 2018, looming now is the time to look at the energy efficiency of your property portfolio and take action if needed.