Costly EPC upgrades

As of 1 April 2023, the new Minimum Energy Efficiency (MEES) regulations will come into effect, meaning it will not be legal to let a commercial property with an Energy Performance Certificate (EPC) rating below ‘E’. The EPC rating of E or higher has been in place since 1 April 2020 for letting a residential property.

Recent surveys have shown that few landlords know their current EPC rating and even fewer know what their EPC rating should be in April. Awareness of the EPC rating system, and how to reduce an EPC rating, is also low.

Further changes are set to come in April 2025. The Government recently consulted on plans for all new residential tenancies in England and Wales to meet an Energy Performance Certificate rating of C from 1 April 2025 and existing tenancies by 1 April 2028. Commercial properties must have an EPC rating of C from 1 April 2027. The MEES regulations will be changed to facilitate this, but we are still waiting for details of the changes.

The current MEES regulations include a cost cap of £3,500, which means a landlord could apply for a high-cost exemption if an energy efficiency improvement were to cost more than this amount. The new 2025 regulations are set to come with a cost cap of £10,000 to reflect the fact that more costly improvements will be required to bring ‘E’ rated properties up to a ‘C’ rating.

The increased cap is of particular concern for landlords in Wales, where properties have some of the lowest prices in the UK, as well as low energy efficiency ratings. Industry bodies are calling on the Welsh Government to provide funding for the required improvements, in the form of grants or interest-free loans.

Whilst some landlords will need to fund larger, more costly, improvements, it is worth remembering that there are several free or low-cost measures that can improve a property’s EPC rating, such as turning down thermostats, checking the settings on heating and cooling controls, having boilers and other plant serviced, improving insulation, and replacing inefficient lightbulbs with LEDs.

For further information, please contact Tom Young on 023 8046 1254.