Landlords: How to prepare for Buy to Let EPC changes

Landlords- How to prepare for Buy to Let EPC changes

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The UK Government has proposed ambitious plans to reduce the country’s carbon footprint, with our homes being a big part of the plan. It is estimated 1/5 of the carbon emissions in this country are produced from UK households so in a bid to tackle efficiency the proposed plans will first target Landlords.

Under the current guidelines, landlords must ensure their properties have a minimum EPC rating of E before advertising & letting their property to tenants. The proposed changes will mean the minimum EPC rating will be increased by 2 bands to a C as of 2025 for all new tenancies and 2028 for all existing tenancies. The policy goes even further in 2030 to bring the minimum to a rating of B.

What will this mean for landlords? The biggest concern for landlords will be the costs involved with bringing their properties up to the new standards. The changes that might be needed include insulation in the walls & roof, installing double glazing and investing in more efficient boilers; all of which is costly work that will need to come out of their personal pockets.

The cost for EPC improvements are currently capped at £3,500, meaning that once you have hit the cap you can register for an exemption so that you do not need to make any further improvements at this time. However, the new regulations include a proposal to increase the cap to £10,000 to put more onus on Landlords to foot the bill.

There are some property exemptions which will mean the new regulations do not apply;

  • A listed building where alterations would unacceptably alter the appearance
  • If recommended works have already been completed but the EPC rating still doesn’t meet the EPC rating
  • When recommended changes are not approved by the mortgage lender or freeholder

If you believe your buy to let may be exempt you can register it on the PRS exemptions register.

I’m a landlord, what can I do to start preparing?

  1. Review your property portfolio and highlight any properties that do not already hold an EPC rating of C or above.
  2. Your most recent EPC certificate will have some recommendations for improving the rating. Start to get quotes for the work and assess the most cost effective options.
  3. Once you’ve worked out a total cost for the work needed, think about how you will fund the improvements. If you don’t have the cash readily available, consider remortgaging a property to release some equity. Time it with the end of your current fixed period to avoid early repayment charges.
  4. Are all your properties still working for you? Speak with your professional team, including your mortgage adviser and accountant or tax adviser to review your portfolio in detail. Is the yield high enough to justify spending money on the property? Can you offset the costs against your tax liability?

With the changes coming into play in 3 years’ time, it’s prudent to start planning now so that you can budget wisely and spread the costs, especially if you have a large portfolio.

For more in depth information, take a look at the Government consultation document, link here.

Author;  Astra Birch Cert CII (MP & ER)

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