EPC – benefits for the Landlord

The EPC (Energy Performance Certificate) is a mandatory requirement for Landlords of rented property but even though you have to have it is always helpful to know how it benefits you.

Contained within the EPC (Energy Performance Certificate) is a report on the expected energy performance of your building, and it will include recommendations to improve energy efficiency. Landlords and homeowners can also arrange to have a DEC (Display Energy Certificate) which shows what is actually being used.

EPC houseThis gives the investor landlord a visible, quantifiable and mandatory energy performance certificate which is turn provides an accurate comparison of energy efficiency of numerous properties.
Property owners are then able to make an informed decision as to which course of action would provide the best improvement on the EPC/DEC rating within a budget.

Having the current and potential energy saving status of the building in this standard format allows the owner to calculate what savings can be made on energy bills against the costs of the recommended work.
Landlords and their agents can use an efficient EPC report as a marketing tool when letting property to tenants. Tenants will be reassured to know that their bills will be as economic as possible.
Obtaining an EPC will assist prospective owners or occupiers to make an informed decision about potential energy consumption and carbon-dioxide emissions from occupying property.

For those that are concerned about green issues, a better energy rating gives a lower carbon footprint.
Buildings with a high asset rating will be more energy efficient and therefore have lower running costs and emit less CO2 whilst buildings with a low asset rating will be less energy efficient and therefore have higher running costs and emit more CO2.

An EPC may help sell or rent a building if there is a choice of similar buildings available to buy or sell if those buildings have different asset rating.

Having an EPC provides a better understanding of your property’s energy efficiency. The energy rating can help rent out your property. It indicates to a prospective buyer or tenant how energy efficient your premises are. It should also provide information that may help to reduce the running cost of the property. The better the rating, the higher the potential rental income and hence higher value. See our post on how the EPC will benefit tenants.

An EPC is ‘current’ for up to 10 years, and the EPC is specific to the building, not the owner, so can be transferred on change of ownership within the 10 year period. For more information please visit our EPC blog.

Advertisements

EPC – benefits for tenants

Having reported on Energy Performance Certificates (EPC’s) and the Green Deal in previous blogs we thought we should comment on what impact this has for tenants of private rented property.

In May 2012 The Royal Institute of Chartered Surveyors (RICS) released research on energy consumption in the home – The changing effects on domestic energy expenditure from housing characteristics and the recent rapid energy price movements. This follows implementation of legislation obliging all property vendors and landlords to have an Energy Performance Certificate (EPC) issued for their property  and the government’s impending Green Deal.

What the report showed was that the majority of private rented property tenants are paying rather more for their energy than owner occupiers. Private tenants paid on average an extra £31 per year than owner occupiers. Tenants in council housing were the best off with savings of nearly £60 per year compared to owner occupiers.

These savings are being seen as a result of owner occupiers and social housing landlords taking a longer-term view of insulating property and modernising heating systems, which in turn will reduce energy consumption and bills.

The RICS report,  states that the single most significant factor in these higher bills is electric heating which can result in bills of between £196-£898 more per year than homes with gas central heating

Jeremy Blackburn, RICS Head of UK Policy, said “Those renting privately should expect the same standards in insulation and heating as homeowners and those in social housing. More needs to be done to ensure private rental property is fit for purpose and energy efficient. It is important that the Green Deal effectively addresses this at a time when tenants across the country are struggling with high fuel bills and increasing rents”.

The EPC allows tenants to see at a glance how energy efficient their new home will be when they are searching for property.

See more about EPC’s

See more about Green Deal

Click on the image to find out more about EPC’s

Tenants are more likely to choose properties with a more favourable energy rating, where other factors are equal, and so landlords with properties that are not energy efficient will start to notice void periods between tenancies as they become less desirable in the marketplace. As Bruce Marshall of Riley Marshall explains “While it is likely that further government legislation will come into force to oblige landlords to improve the energy efficiency of their property, market forces will soon begin to apply pressure”.

Green Deal – energy improvements ‘for free’

The Government’s latest initiative to comply with Carbon Emission reduction is the Green Deal which will be launched in October 2012, but with 32% of the housing market being in rented accommodation how will this affect the rental market?

The scheme will allow homeowners and tenants to take out a loan through their energy supplier to carry out work that improves the energy efficiency of their home. Click here for more information. This loan will then be recovered in instalments by increasing the electricity bill for the property. There is no obligation for anyone to carry out this work but it will improve the EPC rating on the property which may be a useful marketing tool in the future. See our blog on EPC.

By 2018 Landlords must ensure their property has an energy rating of at least E so it may be in a landlords interest to encourage the tenant to have energy rating improvement work done. As the tenant will benefit from lower bills it is in their interest to have the work done too, providing they are medium to long term tenants. The Green Deal could be the most equitable way to meet these costs.

In a nutshell the energy provider for the property will become the Green Deal Provider, and they must be sure that it conforms to the ‘Golden Rule’ which means that any repayments must be less than the savings they will make by having the done work. The loan will belong to the property, and will stay in place if the occupier changes. The work will be underwritten by the agreed contractor for the entire period of the loan.

This allows people to afford to make energy-saving improvements to their home without having to find the money up-front. There will be practical issues about what work will be covered by the scheme, how landlords and tenants would negotiate how to carry out such works (particularly where the tenant is likely to move on fairly quickly), what property purchasers will feel about taking on a Green Deal loan initiated by the previous owner, and which contractors will be eligible to carry out work.

The work most likely to qualify under the Green Deal is to increase insulation. This will have an immediate and ongoing benefit to the occupier of the house, but the landlord would have to give permission for the work to be carried out, and if the tenants are not going to stay long enough to pay off the loan then it would need careful legal handling to ensure that the resultant increase in bills did not make it more difficult for the landlords to relet their property.

We will update our blog with more information about the Green Deal as it becomes available from the government and Green Deal Providers.

EPC’s required for Rented Property

EPC - Energy Performance rating chart

Are you a property landlord who wonders “how do the EPC regulations apply to me?”

Riley Marshall looks at Energy Performance Certificates in rented housing, what you need to know as a landlord and how it can even benefit you.

What is an EPC?

EPC’s or Energy Performance Certificates details information on typical energy use and costs for a property. They have been introduced to make clear to potential tenants and purchasers what energy usage is like on each property when comparing properties on the market for sale or rent. This means they can make an informed decision about whether to proceed with a purchase or tenancy.

It allows at-a-glance comparisons between properties, by grading the property on a scale of A to G – where A is most energy efficient, and G is the least efficient. (The picture at the top of this page shows this chart that makes up part of the report.) The rating is similar to those that are supplied with electrical goods such as fridges, which we are all familiar with now.

The report details which energy saving measures could be implemented to make property more efficient. It will make recommendations on which works are suggested and what that could save the occupier money. There is also a ‘potential’ grading, which shows what could be achieved if energy saving measures – such as insulating a loft – were carried out.

I am a landlord, why do I need an EPC?

An EPC is a legal requirement for any property that is newly-built, or placed on the market for sale or to rent in the UK. If you are a property owner and you need an EPC you must use an accredited domestic energy assessor DEA who will assess your property and provide the certificate. The cost will vary depending on the size of the property and the area it is located. They are valid for 10 years.

Do all properties need EPC’s?

Yes, even if they are newly built, all properties will need an EPC as soon as they come on the market for sale or rent. Where a building has been split into individual units an EPC will be required for each unit that has a heating system.

What is a Domestic Energy Assessor (DEA)?

Approved DEA’s are registered with the government scheme. The government have appointed Landmark to run the website for this scheme and details can be found here www.epcregister.com. You can opt out of displaying your own property on this site, but agents who are offering your property for sale or rent will be obliged to publish it on their website. Potential purchasers or tenants are entitled to a copy of an EPC.

What does my managing agent do?

Your Letting Agent can usually recommend contractors and can even arrange an EPC for you with a Domestic Energy Assessor. You ca can find your own, but you should check that they are members of an accredited scheme to ensure they are qualified, insured and competent, and that the certificate will be valid.

What do I need to do with the information on the report?

The recommendations made in the report are voluntary. As we write this post you are not obliged to carry out any of the works on the report, it is just for information. Obviously as the Government passes further legislation to make us greener as a nation, this may change.

What else do I need to know?

If you have had an EPC issued you can use the reference number to check out how much money and carbon emissions you can save by going to the online EPC Advisor http://epcadviser.direct.gov.uk. For more information visit the Government webpages about EPC’s and selling/renting property. 

Does my rental property qualify for the Green Deal?

If you decide to take action based on the report, then some improvements may qualify for funding through the governments ‘Green Deal’ initiative. This is a scheme which aims to reduce the national carbon emissions and make homes more energy efficient. The Green Deal launched in October 2012 and allows people to make energy-saving improvements to their property, without having to pay for the work up front. The cost will be added to the electricity bills for that property and spread over time. When the occupier moves on the debt will stay with the property, because the energy saving is also staying with the property. Further details on the Green Deal are available on our ‘Green Deal – energy improvements ‘for free’’ blog.