Energy Performance Certificate (EPC) property rules are changing

What are the new EPC rules and how prepared are landlords?

The UK government wants to reach net zero emissions by 2050. As part of its work, it’s looking to reduce emissions across a wide range of sectors, including property. From April 2023 new rules on energy efficiency will come into force in England and Wales which will affect anyone planning to let out or sell a commercial or residential property.

From April 2023, it will be a legal requirement for all commercial rented properties to have an EPC (Energy Performance Certificate) rating of at least E.

This is currently a legal requirement for commercial and residential properties before they can receive a new or renewal lease, but from next year this requirement will be extended to both new and existing commercial leases too.

Energy Performance Certificates (EPCs) set out how energy-efficient a property is from A (most efficient) to G (least efficient). They also show the potential level of emissions and associated costs of improving the rating for that property. Owners must obtain an EPC whenever a property is built, sold or rented. Landlords potentially face large bills to ensure their properties are compliant.

What are the current requirements?

From 1 April 2018 rules came into force, making it unlawful to let properties, both domestic and commercial, on a new lease with an EPC rating lower than E.

On 1 April 2020 the band E threshold extended to existing privately rented residential properties.

Minimum energy efficiency standards (MEES) requirements will extend to all existing commercial leases from 1 April 2023 and the rating will rise in future, with the government consulting on its aims to bring the majority of properties up to EPC band C by the end of the decade Opens in a new window.

Property Investor Report

Here at Handelsbanken we’ve conducted research into this market to find out how prepared landlords are to meet the new regulations. Below are some of our findings:

To meet new EPC legislation changes 95% of commercial landlords will need to make improvements to their properties, with installing insulation (30%), double glazing (27%) and a new, energy-efficient boiler (26%) the most likely upgrades
The anticipated cost of this investment is set to be £95,400 per landlord – or 3% of the total portfolio value
Nearly a quarter of commercial landlords (23%) were not even aware that this legislation was coming into effect
One in nine (11%) plans to sell any properties with a rating of less than E as they cannot afford to make them more sustainable, while only 5% have properties with an E or below rating
The main issues preventing landlords from making their portfolios more environmentally sustainable are not having enough knowledge (50%), regulations making it too difficult (48%) and not being able to access finance (18%)
However, 67% of landlords believe that their portfolio is already sustainable enough

Property Investor Report: Vol 1 (pdf 4.6 MB)

Podcast

Listen to UK head of sustainability, Richard Winder, explain what our SME Landlords survey uncovered about how prepared landlords are for the change to energy performance certificate rules. Plus, Richard shares effective ways to make properties more energy efficient.

Podcast

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