As a buy-to-let landlord, you’ll no doubt be aware of the government’s proposals to tighten rules around eco-friendly properties.
The changes to efficiency performance certificate (EPC) ratings aren’t due to come into force until at least 2025, but they could prove costly. The sooner you take steps to mitigate the risk to your portfolio the better.
You might opt to buy energy-efficient homes now in preparation for the new rules or improve the properties you already have, possibly by unlocking the value held in them.
At Globe IFA, we can help you plan for the changes and ensure you choose the right option for you.
A rise to the minimum rating could lead to fines if you don’t start preparing now
The EPC rating on a property is an indicator of how eco-friendly it is. Energy ratings run from A to G, with A being the most effective and G the least.
Under current rules, the homes you let out must have an EPC rating of at least E. As part of the government’s plans for a greener economy – and their target of net-zero carbon emissions by 2050 – the minimum rating could rise to C.
Although there has been no official confirmation yet, it is expected that the change would apply to all new lets by 2025. For existing lets, and to allow time for alterations and improvements to be made, the proposed cut-off would likely be 2028.
According to the original government briefing from September 2020, two-thirds (67%) of privately rented properties currently fall below a C rating, and so below the proposed threshold. Those properties that didn’t comply would leave landlords liable to fines.
The report by the Department for Business, Energy, and Industrial Strategy also recommends increasing the maximum fine that local authorities can administer. The maximum fine could rise as high as £30,000.
Landlords are already reacting to the proposed changes
Recent figures from Hamptons show that the proposals are already having an effect on the new purchases landlords are making.
The share of homes bought by landlords with an EPC rating of C or better is currently at 50% for 2022. This is the highest figure on record and a marked contrast to the 30% average from 2012 to 2019.
Source: Hamptons
If you plan to expand your portfolio in the coming years, be sure to keep an eye on the progress of EPC proposals and buy accordingly.
But what if you currently own houses with a rating of less than C?
A buy-to-let remortgage could raise the funds you need to make improvements
It always pays to shop around and you should always consider remortgaging when your initial tracker- or fixed-rate period ends. This is because your lender will move you onto their standard variable rate (SVR) at this point and it is unlikely to be as competitive as rates you could find elsewhere.
Remember too that remortgaging is a great way to release equity tied up in your property if you need to raise cash. In this case, the money you raise can be used to make improvements to help push your property to an EPC rating of C or above.
You’ll usually find that a lender is happy to lend you money to make home improvements, as doing so will likely increase the price of the property.
If you currently have a buy-to-let property with an EPC rating below C, go online and visit the government’s Find your energy certificate now.
Simply input some basic details about your property and it will show your current and potential rating. You’ll also find recommendations for the changes that would be needed to reach your property’s eco-friendly potential.
Changes might include:
- External or internal wall insulation
- Floor insulation
- Draft proofing
- Replacing a boiler
- Replacing existing windows for double-glazing.
You’ll need to weigh up the cost of changes against the potential rental income and remember that selling your property might be an option.
It’s also worth bearing in mind that exceptions apply to the current EPC rating rules. These are usually for listed or protected buildings, so be sure that no exemptions apply before you start budgeting for changes.
Get in touch
If you’re a buy-to-let landlord – or are considering moving into the sector – and you have concerns about the potential impact of EPC changes, get in touch. Our team of experienced mortgage advisors are on hand to help you.
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Buy-to-let (pure) and commercial mortgages are not regulated by the FCA. Think carefully before securing other debts against your home.
