EPC policy…the road to tenant hell?

Dear Beaver
I have read your comments on EPC's.
The whole reason the EPC reports are there is to allow the Government to log and monitor the UK and Ireland Housing stock and to have the Energy data for the Kiyoto agreement- which you acknowledge in your comments - with the average EPC rating being a D.
I am a Domestic and Commercial property Energy Assessor and have completed thousands of EPC reports.
I think the main issue is that people see them as another unnecessary cost in the letting and Buying / selling process. But without EPC reports people would be still living in badly maintained - cold and very costly to live properties.
I live in North Northumberland - To give an example. We have a lot of old Sandstone rural properties which are hard to heat and to treat to make more energy efficient. Unless you have been to the moon in the last 2 years - the cost of energy has gone off the map. So without and EPC there is no way of finding out the Energy rating of a property and make recommendations to make things better. Estate agent used to say - Here is the EPC - no one reads them - thing have changed- You cannot rent out a property unless its is rated E or better and is increasing to C as you have pointed out. Some Mortgage lenders will not lend on Buy To Let properties if no E or better. Remember - if the EPC runs out on a rental property while occupied and the tenants are asked to leave- You cannot serve a notice for your property without a valid EPC for that property- So if they Tenants decide to not give access to you or the Energy assessor- You are a bit stuck.
So love then or hate them - they are here to stay and will be used for even more in the future to get property more Energy efficient.

Hello Beaver

On the face of it, energy improvement does seem to be a capital expenditure item as you say. I think I read somewhere that if the legislation eventually goes through for the EPC change (Minimum Energy Performance of Buildings (No. 2) Bill) then energy improvements are to be treated as revenue.
Having said that, here seem to be plenty of energy saving changes that are replacements rather than revenue; for example changing old light bulbs for LED, replacing an old boiler for a better rated one, replacing dilapidated loft insulation, making sure replacement underlay has decent energy performance, replacing old windows with new, as new ones have much better thermal performance. Don’t quote me, but I believe moving from single to double glazing is revenue rather than capital.
I wouldn’t expect to move tenants out during energy improvements, any more than I would move out of my own house during improvements, but perhaps you have something very major in mind.

Brilliant comments especially about tenants should have the choice.

The capital expenditure or revenue expenditure is a major problem.
An example of just how nuts that is is if I include electricity in the rent in an HMO it's a deductible revenue expense. If I buy solar panels to improve the EPC and to generate electricity for the house it's a capital expense. If I export the electricity to a utility company I get paid for it. It seems that if I use it in my HMO I can't claim anything for the cost of generating it. If a commercial building has solar panels installed there are tax breaks but apparently not on residential buildings used for BTL.
With the whole CGT and IHT situation I don't intend to ever sell the house so will never benefit from the capital expenditure allowance.

It takes time to replace an old boiler with a new system !
Combi gas boilers will be banned soon.
Air source /Ground source heat pumps require a big investment and requires the floors coming up to fit the underfloor pipes or cables.
Not really possible with either tenants or home owners in the property.
To rewire a property is also a large undertaking and makes a mess of most walls and flooring and would cause huge disturbance to anyone living in the property.

Reply to the comment left by Martin Harrington at 02/12/2022 - 10:51
I believe the following statement is incorrect. Happy to be proven wrong. It is my understanding that a new EPC is not needed for tenants in situ, even if they are given their notice.

'Remember - if the EPC runs out on a rental property while occupied and the tenants are asked to leave- You cannot serve a notice for your property without a valid EPC for that property- So if they Tenants decide to not give access to you or the Energy assessor- You are a bit stuck.'

Of course the elephant in the room is if this is all for energy efficiency and Kyoto then why is the PRS (20% of total housing stock) being obliged to do this when non PRS is not. If you really want to make a difference then rolling out the new C EPC grade to owner occupiers would have 5 times the effect. Oh I know, because that would lose votes.

Reply to the comment left by Martin Harrington at 02/12/2022 - 10:51
The problem with EPC reports is the number of assumptions made. I found that 1 house on a road where we have a rental had a grade C. When I checked the report, it assumed cavity wall insulation when all the houses have solid walls.
Looking at our report for that particular house, the only practical way to get a level C will be solar panels. Interestingly I have seen several reports which suggest these for houses without a roof facing in a suitable direction.
It's good that some surveyors will now go around a property to advise on how to increase the EPC - this is of practical use.
I am all in favour of improvements, but there needs to be an acknowledgement that the costs for some properties (typically old terraced stone houses) is uneconomic.

I don't know if EPCs have been updated but when we built our economy house in 2010, which was submitted by Rother District Council as their entry for the SE building awards, the EPC assessment couldn't cope with the advanced technology. The box ticking forms simply didn't work. Eventually he gave up and gave it an A+ rating. It seemed a pointless exercise.

As a landlord, agent and property valuer I have often felt that EPCs were of limited value, but in recent years that position has definitely changed.

With the costs of fuel ever rising, tenants are now very concerend about EPCs and efficiency. My own mother rents a farmhouse on a rural estate and we have had battles with the owners to improve the efficiency. The house still has a G band, but some works have been done to secure the exemption. Quite frankly it's not enough.

Banks are now looking closely at EPCs as part of their own carbon footprint; properties with very low EPCs will become unmortgageable, or subject to loaded mortgage costs.

Reply to the comment left by Graham Bowcock at 02/12/2022 - 15:17
The property should not have a Tenancy agreement- as all rental property should be E rated or above -that includes existing tenants and agreements.