This article explains what Energy Performance Certificates (EPCs) are and clarifies the rules surrounding the legislation, before assessing just how important an EPC is to homebuyers and landlords in terms of a property’s future value.
What is an EPC?
It is a four-page document incorporating a traffic light system of A-G gradings to examine a property’s energy performance. It shows how much it will cost to heat and power a property and makes recommendations for energy efficiency improvements, along with the costs of carrying them out and the potential savings that each could realise.
An EPC is needed within seven days of marketing a house for sale or rent. An EPC cannot be amended or updated; if an owner wishes to include any improvements carried out, a new EPC will be needed. Whenever a property is built, sold or rented, an EPC is required. EPCs became a legal requirement in England, Wales and Northern Ireland in 2008.
How long does an EPC last for?
An EPC is valid for 10 years.
How to get an EPC carried out
EPCs are produced by accredited assessors; a local assessor can be found via the government’s official EPC register.
How to obtain a copy of an EPC
To find out if a property has a valid EPC, the address can be entered into the government’s online EPC register. If it does have an EPC, this can be downloaded and saved without charge.
Are EPCs needed for commercial property?
An EPC is required if commercial property is sold or rented.
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 require an EPC.
- Workshops or non-residential buildings.
- A detached building with a total floor space of under 50sq m.
- A building due to be demolished.
EPCs and the Private Rented Sector
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 from the construction of a building.
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, 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 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 EPC rating at the time of the second sale, to assess any impact of 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%.
Although the study implies that buyers are willing to pay more to have a home which complies with current and future energy performance requirements, 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 EPC’s 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.”
The Rightmove 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.
EPCs are here to stay and look set to become more stringent; they are the only way that the government can reduce carbon output from property, 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 the 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 EPC, 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, compliance with the regulations will leave them with a better property, leading to happier tenants willing to stay longer and pay a higher rent as they will be saving on fuel bills.
The UK has some of the oldest housing stock in Europe, and clearly energy efficiency improvements are high on the government’s long-term agenda in a bid to cut carbon emissions and free many people from fuel poverty.