What you need to know about changes to Energy Performance Certificates
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What are government targets for energy efficiency?
As the government works towards its target of reaching net zero emissions by 2050, it has looked to tackle emissions across all sectors of the economy, including property. Britain’s housing stock is some of the oldest in Europe so the government, homeowners and landlords face unique and complex challenges to increase the energy efficiency of homes and commercial buildings.
The UK government has sought to bring in measures to steer property owners in England and Wales to make greener choices (Scotland has a separate system
Opens in a new window of rules and financial help), and part of this is to tighten standards around energy efficiency ratings.
Here is our guide to what is happening and how it might affect you.
What is an EPC rating?
An Energy Performance Certificate (EPC) is a document that sets out how energy efficient a property is from A (most efficient) to G (least efficient). It also sets out the potential level of emissions with the associated costs of improving the rating for that property.
A property’s EPC rating indicates the costs associated with heating and lighting a property. EPC bands are calculated by assessing several factors such as insulation, airtightness, windows and heating systems.
A valid EPC must be in place whenever a property is built, sold or rented. Property owners must obtain an EPC for potential buyers and tenants before the property is marketed to buy or rent, if a current and valid EPC is not already in place.
What are MEES?
Legislation introduced in 2015 established Minimum Energy Efficiency Standards
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Properties with an EPC rating of F or G cannot be let unless work is carried out to improve their energy efficiency. Some exemptions to the EPC and MEES requirements do apply; listed or officially protected buildings for example, do not require an EPC if the owner can demonstrate meeting the requirements would alter it unacceptably. Listed property owners are still subject to MEES regulations, however, and must show how they have tried to comply with the listing limitations when seeking an exemption.
What are the current MEES requirements?
From 1 April 2018 MEES requirements came into force, making it unlawful to let properties, both domestic and commercial, on a new lease with an EPC rating lower than E.
On 1 April 2020 the band E threshold extended to existing privately rented residential properties.
From 1 April 2023 MEES requirements were extended to all existing commercial leases.
The government is also taking a phased approach to exemptions from the MEES requirements. Previously, domestic landlords could apply for an exemption if they showed meeting the requirements would involve a cost to them. In 2019 this changed, and exemptions could only be applied where the cost of bringing a property up to EPC E would cost over £3,500, or the costs of improvements would take over seven years to pay back.
Potential exemptions include if a landlord can show they have carried out the maximum amount of work to improve a property’s energy performance, but are still unable to meet the requirements. Other exemptions include if a tenant refuses the work, or if such works would cause devaluation to the property.
How could requirements for non-domestic (commercial) properties change in the future?
The UK government set out its plans for the future trajectory for non-domestic MEES in its Energy White Paper, published in 2020, proposing commercial properties should meet EPC band B by 2030. It published a consultation paper in June 2021 on proposals for the implementation and enforcement of its EPC B plans.
The government proposed a phased approach to implementation, by introducing two ‘compliance windows’.
2025-2027: As of 2023, if an EPC expires mid-tenancy, a landlord would not be compelled to get a new one. The first ‘compliance window’ would begin with the requirement for landlords to present a valid EPC in April 2025, at a minimum EPC of E. From April 2027, a minimum of EPC C would need to be presented.
2028-2030: The second compliance window would apply from 2028-2030, and require all let commercial real estate in scope to present an EPC of B by April 2030.
Legislation is yet to be put forward to enshrine the changes in law.
How could the requirements for residential properties change in the future?
In 2023, the UK government scrapped proposed requirements for domestic landlords to achieve minimum EPC of C for new tenancies by 2025 and existing by 2028. A proposed boiler ban was revised, with it being alternatively suggested that 80% of boilers would be banned from 2035 onwards. This would be a “soft” ban in the sense that replacement parts would no longer be available, rather than homeowners being compelled to replace systems.
At the same time, the boiler upgrade scheme (BUS), valid for heat pump installations and certain biomass boilers, was revised, now offering up to £7,500 in grants. The UK government also ran a consultation as to whether to make the BUS grant means-tested, and whether to require valid EPCs and/or insulation to be installed as a prerequisite.
The UK government is also going to consult on EPC reforms. The Scottish government closed consultation in October 2023, following the UK’s Climate Change Committee (CCC) recommendations of considering: 1) building fabric, 2) heating type, and 3) cost, within primary EPC indicators. To address cost issues, the government released a library “insight” in September 2023 stating they would consult on the possible decoupling of gas and electricity prices in the UK, given electricity prices remain artificially elevated relative to gas. This would likely result in electric heating systems, including heat pumps, being cheaper to operate than they are today.
The Great British Insulation Scheme (GBIS) also offers grants for property insulation across a range of EPC bands and council tax bands and is open to people from England, Scotland and Wales. Northern Ireland has its own scheme
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Finally, various UK governments are considering mechanisms which would require all existing residential real estate, including unencumbered owner-occupied residential, to have a minimum EPC rating of C by 2035 although this has, at time of writing, not been legislated.
