When it comes to energy efficiency requirements for rental properties, landlords have been left up in the air in recent years.

Unfortunately, another twist in the EPC MEES ratings tale has arrived for landlords. Read on to learn more about the new plans; and what you’ll need to do to keep your portfolio in compliance.

Hold up; what’s an EPC?

An energy performance certificate (or EPC) is a rating of a property’s energy efficiency. 

Any property going up on the market – whether for sale or for rent – must have an EPC. It provides estimates of the property’s heating, lighting and hot water bills for an average household family.

An EPC also scores the property’s energy on a rating scale from ‘A’ (the most energy-efficient) down to ‘G’ (the least energy-efficient). Properties at the lower end of the scale will cost more to run, and will have a larger negative impact on the planet.

A typical new build or recent build with modern insulation measures can usually achieve a rating from A to C; while older properties are more likely to sit in the D to F range and will require renovations to increase their ratings. As of 2023, the median average rating for homes in England and Wales is a ‘D’ rating.

An EPC also provides recommendations for improving the property’s rating (if applicable). Once a property has been reviewed by an accredited energy assessor and issued with an energy performance certificate, the certificate remains valid for the next 10 years.

What’s the minimum energy efficiency standard for rental properties?

Since 2018, landlords have been required to abide by the Minimum Energy Efficiency Standard (or MEES) – the minimum EPC rating that properties must achieve before they can be let.

(You might have also heard of the Minimum Energy Performance Standard, or MEPS. This is effectively the same thing as the minimum energy efficiency standard; although these days, the MEES name is more commonly used.)

Currently, all buy-to-let properties require an EPC rating of ‘E’ or above. Letting out a property with an ‘F’ rating or lower is illegal, and renovations will need to be carried out to bring the property up to at least an ‘E’ rating. 

There is an important caveat, though. Landlords currently have a ‘cost cap’ of £3,500 per property.

This means that if you’re unable to bring a property up to ‘E’ standard even after spending £3,500 on energy efficiency improvements, you can apply for an ‘all improvements made’ exemption; which should enable you to continue letting the property.

What’s changing about EPCs for landlords?

As you’ve no doubt read in the news over the past few years, the UK is targeting net zero carbon emissions to tackle the looming threat of climate change.

MEES legislation changes are likely coming as part of this push to reduce emissions; as well as reducing fuel poverty for households.

From 2030, the minimum EPC rating is planned to rise to ‘C’; meaning landlords will no longer be able to let out any property with a ‘D’ rating or lower.

Wait; wasn’t this supposed to happen in 2025?

Indeed; but times have changed… 

Proposals to raise the minimum rating to ‘C’ for new tenancies by 2025 – and existing tenancies by 2028 – were announced by the Conservative government

Of course, this didn’t go down particularly well with property investors, who were left uncertain on how they would be able to fund renovations (or even if the new rules would be implemented at all).

Despite the proposals going through the consultation stages, a new MEES never actually made it into law under the Tories. Then-prime minister Rishi Sunak eventually opted to scrap the whole thing as part of a larger green policies shake-up in late 2023.

Some investors breathed a sigh of relief, while others who had already carried out energy efficiency improvements fumed; but other commentators wondered if the likely incoming Labour government would end up bringing back the proposals.

Well, that’s exactly what happened.

Since the general election, Labour has announced that a minimum ‘C’ rating is back on the menu; but this time the deadline has been pushed slightly back to 2030.

So, what’s next?

Right now, things are very much up in the air again.

The government seems committed to the 2030 target; but just like the previous Tory proposals, the changes to EPC rules are yet to be introduced into law at the time of writing.

We don’t know whether new tenancies and existing tenancies will be subject to different deadlines, as with the Tory proposals; and we also don’t know whether cost caps will be changing. 

The original proposals were set to see the cost cap raised to £10,000, in order to help cover the more extensive renovations that many landlords will need to carry out. 

At the time of writing, Labour haven’t officially commented on this for the 2023 plans. There are rumours that the government is ‘reportedly’ introducing the plans without bringing back the £10,000 cap, but we couldn’t find a direct source for this.

For now, our advice to landlords is to keep an eye on things and make some contingency plans, rather than diving headfirst into renovations.

In any case though, investing in upgrading your property’s energy efficiency if you can is rarely a bad idea.

Besides the obvious benefits for the planet, properties with higher EPC ratings naturally offer lower energy bills for tenants; which not only means they’ll attract more interest on the market, but also means you can likely ask for higher rental prices.

I have a buy-to-let property (or multiple properties) with a ‘D’ rating. What should I do?

If you haven’t already made changes to your property based on the recommendations provided on your last EPC, now might be a good time to start implementing some of those changes. 

Start with some of the cheaper strategies first; such as:

• installing eco-friendly LED lightbulbs

• insulating your hot water cylinder

• insulating walls and roofing

• installing a smart meter (so tenants can monitor their electricity use)

You should also gather all your paperwork on any property upgrades that you’ve made over the years. An EPC inspection is a fairly non-intrusive process – assessors generally don’t drill into your walls or flooring to check if they’re insulated, for example – so you may need these documents to prove that your property has had the necessary upgrades.

After this, it’s time to get a new EPC assessment and certificate. You might find that your property achieves a C or higher at this stage. If it doesn’t, it might be time to go after some of the more expensive upgrades; such as:

• upgrading to double-glazed or triple-glazed windows

• installing heat pumps

• installing solar panels

Again, your new EPC certificate will provide recommendations for improving your property’s energy efficiency.

My property is old and it’s unlikely that I’ll be able to bring it up to a C rating. Should I be worried?

Achieving a C grade will generally be more difficult for older properties; and as always, the lack of clear government guidance makes it unclear what will happen for properties which can’t meet the requirements.

There’s speculation that lenders will start refusing to offer finance for ‘below-C’ buy-to-lets; leaving landlords stuck with unmarketable properties in their portfolios.

Our opinion? While properties below the C grade will certainly be less attractive to purchase and some lenders may become more selective in the kinds of properties they’ll accept, we think some of the hysteria might be a little overblown.

That said, none of us have a crystal ball; and we do think there needs to be more clarity and support offered to landlords from the government if they want to achieve their climate goals.

Need help with securing funding for your portfolio’s EPC improvements? Our expert brokers can connect you with specialist property financing solutions from across the private and high street lender markets. Call SPV Mortgages on 01489 536 358 or email us at enquiries@spvmortgages.co.uk to discuss your funding needs.