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Minimum Energy Standards Are On Their Way – Are You Prepared?

minimum energy standardsLandlords and Homeowners – How will the value of your property be affected by it’s energy efficiency?

The Energy Act 2011 contains a number of provisions which will affect owners and occupiers of both residential and commercial property. Possibly the most significant is the introduction of proposed minimum energy standards for properties that are let.

It is proposed from April 2018 there will be a requirement for properties rented out in the private sector, whether a commercial or residential property, to have a minimum energy performance rating of “E” on an Energy Performance Certificate (EPC). This will mean it will be unlawful to let residential or commercial properties with an EPC rating of “F” or “G” (i.e. the lowest 2 grades of energy efficiency). The regulations will initially effect new lets and renewals. For all existing tenancies it comes into effect on 1st April 2020. The trigger for the implementation of the new regulations is yet undetermined but could potentially apply to any letting, renewal or subletting of property.

How might this affect you?

This could have significant implications for landlords and property owners, including:

  • Increased difficulties in selling or letting a property with a low rating.
  • Valuations of such property could be affected if their marketability is diminished.
  • Rent reviews could be affected.
  • Property values falling where properties are less marketable.
  • Financing and lending options becoming restricted as lenders look to more sustainable options.

Some exemptions may be made for certain types of property including social housing and shared ownership properties, however, Trading Standards will be responsible for enforcing the rules and there will be monetary fines for breaches.

How can you prepare yourself?

Owners and occupiers need to prepare themselves. They should attain a clear understanding of the energy efficiency of their property assets and assess the cost and viability of undertaking energy efficiency improvements to them. A plan should be made to implement any necessary energy efficiency improvements before April 2018.

Finance for Energy Efficiency improvements are available under the Green Deal. Landlords will need to have achieved an EPC “E” rating or have implemented the maximum package of works allowable under the Green Deal (even if they fall short of the “E” rating).

Properties most at risk of achieving a below “E” rating are generally older and unmodernised. Having an old boiler, single glazing and very little insulation could result in a low rating. Some simple and relatively cheap and easy improvements include changing all the light bulbs for energy efficient ones and increasing roof insulation to at least 300mm or more in a domestic property. Some Utility companies offer grants and finance for replacing older boilers.

How do I get an EPC for my property?

It is a legal requirement for most residential properties to be marketed for sale or rent with a valid EPC. This is normally arranged by the estate agent. EPCs remain valid for 10 years so if you purchased your property within the last 10 years you are likely to have a valid EPC in place. However if you have made changes to your property since the EPC was issued, for example updated the boiler or windows, this may well improve your energy rating and your current EPC may need amending.

The increasing importance of EPCs

We are starting to see EPC ratings impacting the value of properties. Currently it is only a legal requirement to include a current EPC with the property sales pack however some larger lenders are now requesting an EPC be included within the valuation report for commercial properties due to its increasing effect on property values. It is likely that the residential mortgage lenders will follow suit as the change in regulations draw nearer.

If you are a landlord or homeowner looking to sell, you need to ensure your property is as energy efficient as possible if you want to get the best rental or selling price. DHCS provide valuations for both commercial and residential properties and will be mindful of the EPC as part of valuation process.   We are also able to provide residential EPCs if required.

For more information on our commercial and residential valuation services or on energy efficiency regulations please contact our Isle of Wight office on 01983 821212 or via email or our Head office in Fareham.