, Property
A landlord with six terraces checks the certificates. Four are D, two are E. Everything is lettable, nothing is urgent, and the EPCs run for another few years before they even expire.
Then he reads the direction of travel and does the arithmetic on what happens if all six need to reach C at once, in a year when every other landlord in the town is ringing the same three installers.
The current minimum is E, and it already has teeth
The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 introduced the minimum energy efficiency standard, usually called MEES.
Since April 2018 landlords have not been able to grant a new tenancy on a domestic property rated F or G. Since 1 April 2020 that has applied to all existing tenancies too, so continuing to let an F or G rated property is a breach even where the tenant has been there for years.
Enforcement sits with local authorities, which can serve a compliance notice and impose a financial penalty. For domestic property the maximum penalties are set in bands depending on the breach and its duration, running to £5,000 per property, and the authority can publish the breach on a register. For non-domestic property, where the standard also applies, the penalties are considerably higher and are linked to rateable value, up to £150,000.
An EPC itself is valid for ten years, is produced by an accredited assessor, and is required when a property is marketed for sale or let. The register is public, which means a council does not need to visit to see what your property is rated.
The cost cap is what limits the obligation
The regulations do not require unlimited spending. For domestic property, the landlord's obligation is capped: you must make the relevant energy efficiency improvements up to a cost cap of £3,500 including VAT per property. If the property still cannot reach E after spending up to that cap, you register an all improvements made exemption.
Other exemptions exist and each has its own conditions and duration, generally five years:
- Where the only recommended measures require third-party consent, such as a freeholder, a planning authority or the tenant, and that consent has been refused.
- Where an independent surveyor confirms that the measures would devalue the property by more than 5%.
- Where wall insulation would damage the fabric or structure of the building, supported by expert advice.
- A temporary exemption of six months where a landlord has recently become the landlord in defined circumstances.
Every exemption has to be registered on the PRS Exemptions Register before you rely on it. An exemption you believe applies but have not registered is not an exemption, and that is the single most common mistake in this area.
The standard is heading to C, and the dates matter more than the target
The policy direction has been consistent across governments: the minimum standard for privately rented homes rises from E to C. Proposals have generally been framed as applying to new tenancies first and to all tenancies a couple of years later, with a higher cost cap than the current £3,500, and the government has consulted on the detail more than once.
Dates in this area have moved, been abandoned and been revived, so the responsible position is that the direction is settled and the timing is not fixed until the regulations are made. Check the current position before you commit capital. What you can reasonably plan on is that C becomes the standard, that the cost cap will be higher than it is now, and that the properties affected are exactly the solid-walled Victorian and Edwardian terraces that make up a large part of the private rented sector.
Scotland runs its own regime and has taken a different route, so a portfolio spread across the border needs two plans.
What actually moves a rating, and what does not
EPC scores are produced by a standard assessment model, not by a measurement of your actual energy use, which means the improvements that move the number are not always the ones that feel most significant.
The measures that typically deliver the most points per pound are unglamorous. Loft insulation to current depth. Cavity wall insulation where there is a cavity. Hot water cylinder insulation. Low energy lighting throughout, which is cheap and counts. Heating controls, including a programmer, room thermostat and thermostatic radiator valves. Replacing an old boiler with a modern condensing one.
Solid wall insulation is the expensive one, internally or externally, and it is where most pre-1919 terraces run into the cost cap. Solar panels can add a lot of points because the model credits on-site generation.
What often disappoints is replacing windows. New double glazing is costly and moves the rating less than people expect, because the model gives a limited weighting to it relative to walls and heating.
Two practical points. First, the assessor can only credit what they can see or what you can evidence, so keep documentation for insulation that is hidden, or the assessment defaults to an assumption that is worse than the reality. Second, get an assessment done before you start the work, so you know which measures actually move your particular property rather than paying for the ones that sound right.
Plan across the portfolio, not property by property
If you own several older properties, the worst outcome is discovering the deadline in the final year, when demand for installers is at its peak and prices have risen accordingly.
The alternative is dull and cheap. Get current EPCs and their recommendation reports for every property. Rank them by the gap to C and the estimated cost of closing it. Do the cheap wins across everything first. Schedule the expensive fabric work into the natural void periods between tenancies, when access is free and nobody is being disturbed. And decide early which properties are simply not worth the work, because selling one property to fund upgrades on four is a legitimate answer.
Funding is worth checking too, because grant schemes for insulation and heating come and go and are usually administered through local authorities or energy suppliers under obligations placed on them.
Where this shows up in the game
Letting property arrives in Business Baron with the Property & Construction Track, an add-on to the full game. A portfolio in the game lives through decades of rule changes, as a real one does, which is the right frame for a standard that tightens while you still own the building. Work that everybody needs at once is work you pay for in the least convenient year.