Energy efficiency guide for landlords – what is an EPC rating?

Energy efficiency is becoming increasingly important in the rental sector. Not only are more landlords and tenants aware of their responsibilities when it comes to the environment, but a more energy efficient property can save money for both parties.

On top of this, residential and commercial landlords now have to comply with the Minimum Energy Efficiency Standards (MEES) or face being hit with significant fines.

Read our guide to brush up on Energy Performance Certificate (EPC) ratings, find out how to make a property more energy efficient, and make sure you’re compliant with MEES regulations.

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What is an Energy Performance Certificate?

The Energy Performance Certificate, which is valid for 10 years, gives an overview of the energy efficiency of an individual building.

As a residential or commercial landlord, you’re legally required to give tenants a valid EPC when they move into your property.

Every EPC is based on the same criteria, which makes it easy to compare the energy efficiency and running costs of different properties.

That being said, estimated running costs are based on average energy prices at the time of the inspection. This means that the information on the EPC could be up to a decade out of date.

What is an EPC rating?

Every EPC includes a rating on a sliding scale from A to G. You’ll also find information on your property’s typical energy use and costs, as well as recommendations on how to improve its efficiency and save money.

What does ‘EPC rating’ mean?

A property’s EPC rating will be a letter and a score which shows how energy efficient it is, and whether it has high or low running costs.

EPC ratings are broken down like this:

When you get an EPC for your property, it will include a current score and a potential score based on improvements that you could make.

Older homes tend to have lower EPC ratings, and according to the government, the average EPC rating in the UK is D.

How to get an EPC rating

If you don’t already have a valid EPC, you’ll need to organise an assessment. The cost will depend on the size of your property and the assessor you choose.

You can organise getting an EPC through the government’s register, which will show you all the accredited providers in your area. The cost of an EPC can range from a minimum of around £60, so it’s worth getting a few quotes.

How to improve EPC rating

You can increase your EPC rating by making a range of improvements, from insulation and draught proofing, to replacing windows or using solar panels.

Here’s a breakdown of some of the most common improvements, as set out by the government:

Room-in-roof insulation

• typical cost: £1,500-£2,700
• annual energy savings: £837
• effectiveness: suitable for a property with a low EPC rating of G, F or E

Draught proofing

• typical cost: £80-£120
• annual energy savings: £18
• effectiveness: a quick and affordable improvement, most effective in a property with a rating of between E and D

Low-E double glazed windows (made from low emissivity glass)

• typical cost: £3,300-£6,500
• annual energy savings: £123
• effectiveness: suitable for properties with single glazed windows which have an EPC rating of C

Solar photovoltaic panels

• typical cost: £5,000-£8,000
• annual energy savings: £287
• effectiveness: a substantial improvement which will have the biggest impact in a property that already has an EPC rating of just below a B

The above information relates to residential properties. You can find out more about the cost and effectiveness of commercial property improvements here.

What are the Minimum Energy Efficiency Standards?

The Minimum Energy Efficiency Standards (MEES) were introduced as part of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015.

Since 2018, landlords of both commercial and residential properties haven’t been able to grant new tenancies for properties with an EPC rating of F or G.

This means that if you’re planning to rent out a property which has an EPC rating lower than E, you’ll have to improve its energy efficiency first or register an exemption.

In 2020, the rules were extended to cover all existing residential tenancies, while the same extension will take place in the commercial sector during 2023.

As part of the Minimum Energy Performance of Buildings Bill, the government is considering increasing the minimum EPC requirement to C for all new tenancies by 2025 and all existing tenancies by 2028.

A Simply Business survey of over 600 landlords found that more than half (55 per cent) will need to make improvements to their rental properties if the minimum EPC standard is increased to C.

One in five (19 per cent) landlords estimated that they’ll have to spend over £10,000 on improvements, while one in four (27 per cent) anticipated a spend of between £5,000 and £10,000.

A further two in five (40 per cent) thought they’d need to spend between £1,000 and £5,000 to increase their EPC rating.

What are the MEES exemptions?

Not all properties are covered by MEES regulations. For example, if your property is listed and not legally required to have an EPC, then you won’t need to comply.

Meanwhile, if you’re letting a residential property which isn’t an assured tenancy, regulated tenancy or domestic agricultural tenancy, then it’s likely you won’t have to worry about MEES.

There are also a range of MEES exemptions which allow you to continue letting a property with an EPC rating of F or G. Most exemptions last for five years, but some are temporary and only last for six months.

These exemptions include if your property still has an EPC rating below E after you’ve spent £3,500 on improvements (known as the ‘cost cap’), or you’ve unexpectedly become a landlord.

If the costs for improvements are too high, or you can’t get the consent you need from a freeholder or planning department to make changes to the property, then you may also be able to register for an exemption.

The list of exemptions is the same for residential and commercial properties, but slightly different issues are covered. Here it is in full:

• all relevant improvements made
• high cost
• wall insulation
• third-party consent
• property devaluation exemption
• recently become a landlord

How can you register an exemption?

You can register an exemption on the UK government website. You’ll need to give your details, choose which exemption you want to register, and upload supporting evidence such as letters, invoices and a valid EPC.

What are the penalties for non-compliance?

There are a number of financial penalties for not complying with MEES, depending on whether your property is residential or commercial, and how long you’ve been in breach for.

When enforcing the EPC regulations, local authorities will be checking your compliance with four things:

• whether you’ve granted a new tenancy with an EPC rating of F or G since April 2018
• whether you’ve continued to let properties with an EPC rating of below E since April 2020 (this will apply from 2023 for commercial landlords)
• whether you’ve registered any false or misleading claims on the exemption register
• whether you’ve failed to meet a compliance notice

Penalties for residential properties

If you’ve been letting a non-compliant property for less than three months, the penalty is up to £2,000, and if it’s been more than three months then the penalty goes up to a maximum of £4,000.

You can also be fined up to £1,000 for registering a false exemption and up to £2,000 for failing to deal with a compliance notice. The maximum penalty per residential property found to be in breach of the regulations is £5,000.

Penalties for commercial properties

If you’ve been letting out a non-compliant commercial property for less than three months, the penalty is up to either £5,000, or 10 per cent of the rateable value of the property (whichever is higher), and with a maximum penalty of £50,000.

If you’ve been letting out a non-compliant property for more than three months, the penalty is up to £10,000, or 20 per cent of the rateable value of the property (whichever is higher), with a maximum penalty of £150,000.

As with residential properties, there’s also a penalty for providing false or misleading information to the exemption register, or failing to comply with a compliance notice.

How do I make sure my property is compliant?

If your property’s EPC rating falls below band E, an energy assessment will make recommendations on how to improve its energy efficiency.

It’s important to note that if your EPC rating is E or higher, you don’t have to follow through with the recommendations. That being said, improving the energy efficiency of your property can make it more appealing to tenants, and may save you money in the future.

What's happening with gas boilers?

Replacing gas central heating systems, which are used in 85 per cent of rental properties, with heat pumps is part of the government’s plan to achieve net zero carbon emissions by 2050.

As part of the government’s Heat and Buildings Strategy, which was announced in early October 2021, landlords will be able to access grants of £5,000 to replace gas boilers with heat pumps from April 2022.

Gas boilers will no longer be sold after 2035 and it’s estimated that an air source heat pump costs between £6,000 and £18,000, depending on its size.

Read more in our Autumn Budget guide for landlords.

Do you have an unanswered question about the EPC ratings and MEES? Ask us in the comments below.