‘G’ up for energy performance.

Since October 2008 Energy Performance Certificates have been added to the documentation landlords are required to provide their tenants. The good news is that, costing in the region of £100 (so far), the certificates will be valid for up to 10 years. Meanwhile landlords are being offered a financial incentive in the form of an energy saving allowance to move their properties up the performance scale, says Landlord Knowledge.

Since October 2008 landlords offering property for rent have been required by law to provide prospective tenants with an Energy Performance Certificate for their property.

The certificates (‘EPCs’) will have to be provided free either when (or before) any written information about the property is provided to prospective tenants or a viewing is conducted. They will not have to be provided if the landlord believes the prospective tenant is unlikely to have sufficient funds to rent the property or is not genuinely interested in renting, or the landlord is unlikely to be prepared to rent the property to the prospective tenant.

A new certificate will not be required on each let since, in the case of rental property, EPCs will be valid for 10 years.

The requirement is being introduced to comply with the EU’s Energy Performance of Buildings Directive (EPBD) which applies to all property, including rented property. This became law in 2003 and allowed until January 2009 for full implementation so as to provide time for sufficient numbers of energy assessor to be trained.

The Directive’s requirements have been introduced into English and Welsh law along with the controversial Home Information Pack regulations that require sellers to produce packs providing information about their title, local searched, plus an EPC. The full requirements are included in the Home Information Pack (No 2) Regulations 2007 and the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007.

In Scotland, the Single Survey, the equivalent to HIPS, also includes an energy report requirement.

So far as energy performance is concerned, the regulations require an EPC when a building is constructed, sold or rented out. When included in a HIP related to a property sale, the EPC should be no more than 12 months old when the property is first marketed. In other circumstances EPCs have a 10 year life.

HIP requirements have already come into force so far as three and four bedroom properties are concerned. And EPCs will be required for all new builds from 6 April 2008, and for all rentals as from 1 October 2008.

In Scotland EPCs for rental properties will be required by January 2009.

By 2009, all buildings in the UK that are constructed, sold or rented out will have to have an Energy Performance Certificate. In the case of larger public buildings a ‘Display Energy Certificate’ will have to be on show.

There are a number of different permitted assessment methods, their use depending upon the type of building being assessed. Dwellings will usually be assessed using the ‘Reduced Data Standard Assessment Procedure’ (RdSAP), an industry agreed standard that allows some data to be inferred.

Its use involves inspectors collecting standard information on the type of property and construction, the property dimensions including room sizes, types of windows, room and water heating systems and controls, plus other details such as wall, loft and water tank insulation. Agreed reference coefficients are then applied to arrive at an energy rating.

EPCs for dwellings will rate the energy performance of buildings (not the appliances within them) on a scale of ‘A’ to ‘G’ – where ‘A’ is the most efficient, and ‘G’ the least. This will be displayed graphically in a similar way as present energy labelling on white goods such as fridges and washing machines. (For an example click here, or for Scotland click here).

Two ratings will be shown: an overall energy efficiency rating, and an environmental impact rating in terms of carbon dioxide (CO2) emissions – the higher the rating, the less impact on the environment.

The idea is that because EPCs will be prepared using standard methods with standard assumptions, it will be possible to make comparisons of the energy efficiency of buildings. The Government argues that in the case of rental properties, high rating will be more desirable and will impact on the marketability of properties – and hence ultimately on rent levels.

EPCs will always be accompanied by a recommendation report including a list of measures (such as low and zero carbon generating systems) that would improve the energy rating of the building and an indication of the rating that could potentially be reached should these recommendations be implemented.

It suggested each year an estimated 2.5m plus homes will require an EPC.

ECPs may only be produced by authorised Domestic Energy Assessors (DEAs) who have been able to demonstrate appropriate qualifications or competence.

At least one DEA trainer is claiming, that besides benefiting from flexible working hours, qualified assessors will be able to earn up to £100,000 a year.

According to the Government, buildings are responsible for almost 50 per cent of all energy consumed in the UK and over a quarter of CO2 emissions, while forecasts suggest a large proportion of current buildings will still be in use in 2050.

An initial survey of EPC results found that on average four bedroom homes were being rated ‘E’. ‘This could potentially rise to a “C” if consumers undertake measures recommended in the certificates, such as loft and cavity wall insulation’, claimed the Government.

The top five recommendations given by assessors for improving energy efficiency have been: cavity wall insulation, changing to low energy lighting, putting thermostatic valves on radiators, loft insulation, and double glazing.

The Government said the price of an energy performance certificate will be set by the market and it expects the cost to vary according to the size, type and location of the property. However, it is predicting that the cost of a stand alone EPC for an ‘average’ home is approximately £100. This seems to be borne out by prices currently being quoted by providers.

The Government also suggests that the time taken to perform an energy assessment will be ‘about the same time as performing a housing valuation report’.

Landlords wishing to make energy saving improvements to their properties either before or after obtaining an EPC are offered some help from the Government.

The Landlord’s Energy Saving Allowance, originally introduced in April 2004, now covers loft insulation, cavity wall insulation, solid wall insulation, draught proofing, hot water system insulation, and floor insulation.

Expenditure on these items would otherwise be treated as capital expenditure – which means it could not be deducted from rental income to arrive at a taxable item. However, the LESA allows up to £1,500 per property spend on such items as a straight deduction from rental profits. Further details are on the Inland Revenue website..

The allowance is to run until 2015. The ‘per property’ rule (rather than the former ‘per building’ restriction means that for a house converted into three flats an allowance of £4500 can be claimed. However, the allowance is not available for holiday lets or resident landlords.

Useful links

Example EPC

EU Directive: Energy performance of buildings

BRE: Environmental rating of homes

Dept Communities & Local Government: Home Information Packs

Dept Communities & Local Government: Code for Sustainable Homes

Carbon Trust

Scottish Buildings Standards Agency

HM Government: Home Information Packs – buyers & sellers

Energy Saving Trust
Making Private Rented Housing Energy Efficient – the Flagship Home case study

Creative Environmental Networks
Useful information for landlords about energy efficiency

Energy Efficiency
The Guide – everything you need to know about energy efficiency in your properties

What to buy?
Energy Saving Recommended products – a list of the most energy efficient household appliances and heating systems available

Funding Information

A searchable database of grants available across the UK for energy efficiency improvements

The Landlords Energy Saving Allowance – an income tax allowance for private landlords

Details of the Warm Front grant (England only) – for energy efficiency measures if your tenants are in receipt of certain benefits

Technical Information

The Housing Health and Safety Rating System – What It Means For Landlords

Guidance on integrating energy efficiency into property refurbishment

Making Private Rented Housing Energy Efficient – the Flagship Home case study

Energy efficiency improvements cost less than you think, says energy consultant SE2

Central heating, insulation, and double glazing can increase the long-term value of your properties and make them more attractive to renters. What’s more there are many grants available and they can reduce your income tax bills.

Here are some simple things you could do to improve the energy efficiency of your properties:

1. Top up your loft insulation and insulate your walls. Your energy supplier is offering big discounts on prices for insulation right now – make the most of them!
2. Update your heating system with a high-efficiency condensing boiler and effective heating controls.
3. Take advantage of significant discounts and buy a new, more energy efficient washing machine, fridge or freezer.

Your tenants will benefit from lower running costs and a warm, comfortable living environment, making them more likely to stay longer in your property.

Energy efficiency improvements can also help you meet your legal requirements, whilst supporting your reputation as a landlord who takes the quality of their properties seriously and delivers a professional service for tenants.

Energy Performance Certificates

From October 2008 all rental properties in England and Wales will be required to have an Energy Performance Certificate (EPC) prepared by an accredited Energy Assessor. These will offer opportunities for landlords to differentiate their property from their competitors and gain a distinct marketing advantage.

The energy efficiency and environmental impact of your property will be rated on a scale from A-G (where A is the most efficient and G the least efficient). Current running costs for heating, hot water and lighting will also be shown on the certificate, together with a list of recommended energy saving improvements.

Click here for an example of what the certificate is likely to look like.

Help is at Hand

A network of Energy Saving Trust advice centres operates across the UK. They provide impartial information on home energy efficiency and can advise you on any grants and offers that may be available to help you with the costs of installing measures.