How will EPC changes affect landlords in 2025?

Landlords are on a tight deadline to improve the energy efficiency of their properties by 2025, following the recent changes made by the Government.

Changes to the Minimum Energy Efficiency Standard or ‘MEES’ Regulations will soon impact and increase the minimum energy performance threshold needed to rent out a domestic property.

Derek Johnson, Head of Building Surveying at Sillence Hurn Building Consultancy, explains: “At present, around 40% of homes in England are currently rated an EPC (energy performance rated) C or above.

Under the new legislation, properties that have an EPC rating of less than a ‘C’ from 2025 will no longer be lettable to new tenants. As it stands the minimum threshold is an ‘E’ rating.

"Landlords with domestic properties rated ‘E’ or above will, for now, be permitted to continue letting the property out, if the existing tenancy predates the new 2025 changes coming into effect."

A landlord may legally continue to rent their property out until 2028, providing it is to the same tenant, and not a new one. This rule applies, even if the property falls below the new EPC ‘C’ minimum threshold in 2025.

In summary, these changes are likely to be phased in, starting with new tenancies from 2025 and then including all tenancies in 2028.

Some landlords will already have invested in bringing their property up to an E standard to comply with the previous EPC legislation that came into effect in 2018. However, around 70% of landlords own rental properties with an EPC rating of D or below.”

Should you sell or look to improve your EPC rating?
“NatWest and S&P Global revealed that 40% of future home buyers consider the EPC rating ‘very important’. Research suggests that improving the property’s energy efficiency can also boost its value by up to 20% and increase its desirability among tenants and future buyers.

An influx of homes entering the market may be inevitable as landlords race to offload their properties rather than upgrade them.

If this were to transpire, it’s likely to generate a rental property shortfall that would see rent on privately rented homes pushed up, further benefiting those landlords who are in possession of EPC C+ rated properties.

It is worth also considering if the property in question falls under the criteria for exemption from an EPC.”

How much will it cost to upgrade my property(ies)?
“It is important to note that currently there is a ‘Cost Cap’ on upgrade works and under the current legislation you will never be required to spend more than £3,500 including VAT on energy efficiency improvements.

Whether this ‘Cost Cap’ is to survive the 2025 changes remains to be seen, given the substantial rise of the minimum threshold from an ‘E’ to a ‘C’. For many landlords, the bill could easily exceed four figures, with the works only possible when the property is untenanted.

Research conducted by Shawbrook Bank revealed that energy improvement works already undertaken by landlords averaged £8,900, which amounted to £3,000 more than predicted.

This difference between perceived and actual costs of raising a property’s energy efficiency comes down to the rising costs of labour, materials, and supply chain delays, a consequence of both inflationary price rises and the conflict between Russia and Ukraine.”

What should I do to bring my EPC rating up to C?
“Engage with an EPC assessor to conduct an inspection of your property and determine its current EPC value.
Each EPC will come with an accompanying recommendation report, indicating what improvements could be made, along with each improvements’ impact on the rating and their ‘payback’ period.

Even if you already have an in-date EPC it’s still worth investing in a new one, particularly if you’ve made upgrades to your property since it was issued.

Once you have your EPC, a chartered building surveyor can advise you of the works needed to bring your home up to spec and how much these will cost.”

Next steps
From advice around feasibility, cost planning, undertaking the work in the current market, and specifying works before overseeing and managing the implementation of changes in accordance with EPC corresponding report recommendations, Sillence Hurn is working closely with landlords across the South to help improve their properties to the required EPC standard. You can find out more about their services at sillencehurn.co.uk

Main image Derek Johnson, Head of Building Surveying at Sillence Hurn Building Consultancy.