Written by Mark Michaelides, Chief Commercial Officer at Molo
This is despite the fact that, since 2020, landlords have not been allowed to rent out properties with an EPC rating below E.
But councils in many parts of the country have not been enforcing legal standards for cold and damp. Indeed, pressure group Climate Emergency UK has found that almost two-thirds of councils in England and Wales are failing to investigate landlords for letting out homes below legal energy efficiency standards.
Freedom of Information requests to all councils made by the group found 200 councils, including Sheffield, Hillingdon and Blackburn, have not investigated whether landlords are complying with these standards.
Does this research give the impression that buy-to-let (BTL) professionals don’t need to take the rules seriously? It does not.
First, plenty of councils are on the case. Many have investigated landlords and discovered hundreds of properties that fail to comply with the rules. Luton Borough Council audited 1,245 privately rented properties and discovered 243 (20 per cent) were not compliant. Redbridge Borough Council investigated 861 properties and sent enforcement notices to 162 (19 per cent) of these.
Second, the Government is consulting on measures to improve the enforcement of energy efficiency regulations in the private rented sector (although these are yet to come into force). The days of lax, laissez-faire enforcement are over.
The Government is also in the process of establishing a new mandatory online registry where landlords must register information about any property they are renting out in a bid to help councils crack down on rule-breaking. The changes are designed to help councils target rogue landlords.
And that’s where we come in because while some councils may not be monitoring energy efficiency standards properly, lenders do. Molo certainly takes energy rules seriously.
None of this should come as a surprise to BTL professionals. Introduced in 2007, EPCs have become increasingly important in the private rental sector. Landlords with properties in England and Wales have been prohibited from letting properties with an EPC rating below E since April 2020. EPCs remain valid for 10 years and must be provided to prospective tenants before a tenancy begins. Failing to provide an EPC can currently result in penalties of up to £5,000 for domestic properties.
EPCs offer several benefits for landlords beyond mere compliance. Energy-efficient properties can command higher market values and rental rates. Increasingly eco-conscious tenants favour properties with lower energy costs. And properties with better EPC ratings typically let faster.
The Government has proposed significant changes to EPC requirements set to take effect in 2028. Not only do these include a substantial jump in energy efficiency standards (with the minimum EPC rating for rental properties increasing from E to C), the cost cap for required improvements may increase from £3,500 to £15,000, meaning many landlords may need to invest significantly more in property upgrades. And new tenancies may need to comply by 2028, with all existing tenancies meeting the new standard by 2030.
Brokers should be reaching out to their landlord clients, nudging them on this. Property investors will need to consider taking proactive steps to prepare. Landlords ought to understand their properties’ current ratings and when certificates need renewal. They need to consider implementing recommendations during natural void periods or alongside other maintenance work. Landlords should also budget for upgrades with common improvements, including insulation upgrades, heating system replacements, and installing double glazing. They also need to explore their funding options, researching government grants and incentives that might offset improvement costs.
While Molo is focused on making the mortgage experience better aligned with the needs of modern landlords, we take EPC compliance seriously. The direction of travel is clear, the penalties are rising, and brokers should understand that the best-prepared landlords will be the ones who thrive in the coming years.
