This article explains what Energy Performance Certificates (EPCs) are, clarifying the rules surrounding the legislation before looking at EPCs and the private rented sector and concluding with how they may affect house values.
What is an Energy Performance Certificate or EPC?
An Energy Performance Certificate is an energy efficiency requirement which aims to reduce energy use. An EPC is a four-page document incorporating a traffic light system of A-G gradings to demonstrate a home’s energy efficiency. It provides an energy efficiency rating showing how much it will cost to heat and power a property and makes recommendations for domestic energy efficiency improvements, giving a potential rating, the costs of carrying out the works along with the potential savings that each could realise.
An energy performance certificate is legally required within seven days of a letting agent or estate agent marketing privately owned properties for sale or rent. An EPC cannot be amended or updated; if a property owner makes necessary changes and wishes to include the improvements, a new EPC will be needed. Whenever a property is built, sold or rented, an up-to-date EPC is required. EPCs became a legal requirement in England and Wales in 2008.
How long does an EPC last for?
An energy performance certificate is valid for 10 years in England and Wales.
How to get an EPC carried out
Energy Performance Certificates are produced by accredited energy assessors who can be located by using the government’s official EPC register. Important information about Energy Performance Certificates can be obtained by visiting the Government’s website at https://www.gov.uk/buy-sell-your-home/energy-performance-certificates
How much does an EPC cost?
This depends on the size, type of house and how many bedrooms are in the property, as well as the individual accredited energy assessor, but energy performance certificate prices start from £60.
How to get a copy of my EPC certificate check
To find out if a property has a valid EPC, the address can be entered into the government’s EPC online register. If it does have an EPC, this can be downloaded and saved without charge. For more information visit https://www.gov.uk/find-energy-certificate
Are EPCs needed for commercial property?
Commercial buildings require an EPC to assess energy performance if they are sold or rented out.
Properties which are exempt from having an EPC:
- While listed buildings do need an EPC to be compliant with the Minimum Energy Efficiency Standard, an EPC is not required for a sale.
- Temporary buildings which are only used for up to two years.
- Places of worship.
- Industrial sites; however, factories and workshops do require an EPC.
- Workshops or non-residential buildings.
- A detached building with a total floor space of under 50 square metres.
- A building due to be demolished.
EPCs and the Private Rented Sector
A minimum energy efficiency level for domestic private rented properties is set out in the domestic Minimum Energy Efficiency Standards (MEES) Regulations which apply to all privately rented properties that are let on specific types of existing tenancies or have a legal requirement for an EPC. If a property is let on an assured tenancy, a regulated tenancy or a domestic agricultural tenancy, and is let or marketed for sale or let in the past ten years, there is probably a legal requirement for it to have an Energy Performance Certificate.
For such properties with an F or G rating, the necessary changes must be made to comply with MEES regulations. If a property has not been let on one of the above tenancies or has not been marketed for sale or to let in the last 10 years, it is not covered by the regulations and can be let out with an F or G rating.
Since April 2020 properties covered by MEES regulations cannot be let or continue to be let if their EPC rating is below E, unless an exemption is in place. Landlords planning to let a privately owned property with an F or G rating must carry out improvements to ensure that the rating reaches an E, or register an exemption prior to a new tenancy being established. Landlords currently letting property with an F or G rating must carry out improvements to reach an E immediately, or register an exemption. For properties which are empty, a landlord need not carry out any improvements until he intends to let them.
MPs are currently debating minimum energy efficiency standards contained in the Minimum Energy Efficiency of Buildings Bill, which includes a proposal to raise the EPC requirement for properties in the private rented sector from an E grade to C. Currently, if a landlord invests a maximum of £3,500 on energy upgrades to a property, they can qualify for the `all improvements made’ exemption, which means that many properties do not get upgraded and can be rented out while having a rating of below E.
The increasing costs associated with reaching a higher EPC rating mean that more landlords will qualify as exempt and many homes will not be upgraded, which will not help the government meet its net zero targets.
Criticism of EPCs
The relevance of EPCs has been questioned as they do not measure the carbon impact which has been created during the construction of a building. Ways of making an assessment of this are currently under scrutiny.
Does an EPC affect the value of your home?
While making energy saving improvements to a home could increase its sale value according to a study by Rightmove, potential buyers are still making decisions based on emotional as well as practical considerations. The Rightmove study found that an EPC rating of C or above can add an average of 16% to a house’s value if the property improves its energy efficiency rating from a low F grade to C.
The study examined over 200,000 homes listed on Rightmove that had sold twice, having an improved energy performance rating at the time of the second sale, to assess any impact of energy improvements on the sale price. Results showed that improving an EPC rating from E to C adds an extra 8% on average to a house value, while improving from a D to a C gains an extra 4%. The survey found that over the last five years, 22% of homes in Great Britain have upgraded from a D rating or below to C or above.
Although the study implies that potential buyers are willing to pay more to have a home which complies with current and future energy performance requirements, and will save money on energy bills, in reality this may not be at the forefront of a buyer’s mind. When a buyer sees their dream house, other considerations often become secondary, according to Tim Rickitt, director of Rickitt Partnership estate agents in Cheshire.
“Buying a home is an emotional decision and when someone falls in love with a house, they are willing to take on any challenges that it may present,” he commented. “Until recently, no one has paid a lot of attention to energy performance certificates when buying a house; this may start to change, especially when it comes to an investor or someone looking to rent out a property where having an E rating or above is important.
“EPC’s might start to play a bigger role in property sales over the next five to 10 years, but not at the moment. The perfect property doesn’t exist; buyers appreciate this and will want to put their own mark on a house by making alterations when they buy it.”
More rigorous EPCs
Energy Performance Certificates are here to stay and look set to become increasingly stringent; they are the only way that the government can lessen carbon output from property and reduce environmental impact, according to Tim Kampel, director of Leeds-based Box Property Solutions. He said that the current 10-year lifespan of an EPC may be reduced, forcing homeowners to carry out energy improvements if they want to update their document. Mr Kampel said:
“We will see long-term plans for a property introduced in terms of its energy efficiency; the new energy efficient retrofit standard, PAS 2035, is a framework for applying energy retrofit measures to existing UK buildings and it is going to become increasingly relevant.”
“As well as the Energy Performance Certificate, there may be a condition and occupancy report required to pin down facts about how a property is used to create a long-term plan for it. If, for example, this identifies that a house needs solid wall insulation, but will also need a new roof, the roof can be fitted to include an overhang to accommodate the wall insulation.”
“While it is not currently possible to rent out a property with an F or G rating, there are consultations under way about raising this to a C rating by 2025 for all new tenancies, and by 2028 for all tenancies. The improvement work required would cost an average of £4,000, with a £10,000 spend cap. There is also a rumour that Council Tax will be set in accordance with the EPC to encourage owners to be energy efficient.”
Mr Kampel added that while landlords may see the EPC as an unnecessary tax, making the necessary changes to comply with the regulations will improve a home’s energy efficiency, leading to happier tenants willing to stay longer and pay a higher rent as they will be able to save money on heating bills.
The UK has some of the oldest housing stock in Europe and reaching Minimum Energy Efficiency Standards for a high percentage of it is clearly going to be a challenge. However, energy efficiency improvements are high on the government’s long-term agenda in a bid to reduce our environmental impact by cutting carbon emissions, reducing energy use and freeing many people from fuel poverty along the way.