An Energy Performance Certificate, commonly referred to as an EPC, rates the energy efficiency of a property. The energy efficiency is regulated by Minimum Energy Efficiency Standards (MEES), which currently differ depending on whether the leased property is residential or commercial. Properties receive an energy efficiency rating in the form of an EPC following an Energy Assessment Survey, which is conducted by a Domestic Energy assessor. The assessor surveys the property, examining aspects of the interior and exterior such as windows, rooves, insulation, solar panels and lighting.

An EPC will rate a property between A and G, A signifying ‘very energy efficient’ and G, ‘not energy efficient’.

Residential Landlords – What you need to know.

The present position since 1^st April 2020 is that a residential property must have an EPC rating of E or above for it to be the subject of a new residential tenancy. This is due to change in 2025 following current government proposals, whereby landlords issuing any new residential lettings will be required to ensure the property has an EPC rating of C or above.

Further changes anticipated from 2028 will require properties subject to any tenancy, whether new or continuing, to have an EPC rating of C or above.

The obligation to perform the relevant renovations to the property and subsequent costs incurred lie with the landlord, although recovering all or some of the costs by way of a service charge may be an option.

From 1^st April 2023, it will be an offence for a landlord to let a residential property that has an EPC rating of F or G, unless the property is registered under a qualifying exemption. See below for further details on exemptions.

Commercial Landlords – What you need to know.

Whilst under current regulations a tenancy cannot be granted to new or existing tenants for properties where the EPC rating is lower than an E, from 1^st April 2023 it will now be an offence. The offence will be punishable by a fine based on the rateable value of the determined ‘sub-standard’ property and will be between £10,000 – £150,000 per breach.

There are already plans for the regulations to tighten again in the near future with the government proposing a minimum EPC rating of C or above for commercial properties from 1^st April 2027, and B or above by 2030.

Impact on both Commercial and Residential Landlords

• There will likely be a delay in contractors delivering works/limited availability due to influx of work.
• The upfront cost of necessary work.
• If unable to provide a tenancy without remedial works, there will be a potential loss of income.

Exceptions and Exemptions

• Wall Installations

If a recommended wall installation would negatively impact the structure of the property.

• Devaluation

If the works required are evidenced by a valuation report to either damage the property or decrease the property value by 5% or more.

• Consent

Where consent is refused by tenant or another occupier within the same building, or relevant planning permission is refused by the local authority, or a lender with a charge over the property.

• New Landlord (limited circumstances)

Where a person becomes a new landlord suddenly, and it is unreasonable for them to comply with regulations immediately, a potential 6-month exemption will last from the date they became the landlord.

For further clarity on the exemptions which may apply, see the government guidance.

None of the above exemptions apply automatically. Landlords must apply or register the exemption on the PRS Exemption Register before the commencement of a new tenancy, or before 1^st April 2023 for existing tenancies.