33.5% of Southampton Landlords Could be Fined £5,000 each with New Energy Regs

 … whilst possible new mortgage rules for Southampton homeowners would make it harder to sell their draughty old properties

As the UK has committed to a legally binding target to be carbon neutral by 2050, one of the biggest producers of greenhouse gasses are residential properties. To hit that target, every UK property will need to achieve a minimum grade of C on their Energy Performance Certificate (EPC) by 2035. The issue is two thirds of UK’s homes (around 19 million households) are rated D or below.

To help the country hit its targets, in 2018 and again in 2020, the EPC requirements altered for buy-to-let landlords, meaning they couldn’t rent their property unless it had a minimum energy rating of ‘E’ or above.

And now for homeowners, the Government are considering forcing banks and building societies to publish the average EPC rating for all the homes they lend money on and if the banks and building societies don’t hit the Government EPC targets, they will be fined (meaning those homeowners with low energy efficient properties will have to pay much more for their mortgages).

So, let’s look at these two issues, first regarding Southampton landlords and their EPC’s, so you know what your lawful responsibilities are and what else Southampton landlords can expect in the future.

Since October 2008, all UK rental properties have required an EPC, yet from April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to EPCs have also required all rental properties with new tenancies and renewals to have a minimum EPC rating of ‘E’ or above. However, since April 2020, the MEES regulations have applied to all existing tenancies as well, meaning if your Southampton rental property doesn’t have a valid EPC rating of ‘E’ (or above), it is illegal to let out.

 572 rental properties in Southampton are currently let out with a ‘F’ or ‘G’ EPC rating, making them illegal to rent out and each landlord liable for a £5,000 fine – they just don’t know it (That’s £2.86m in total)

The EPC lasts for 10 years and gives an energy rating of between A - very energy efficient to G - very energy inefficient. If you find yourself, as a Southampton landlord, with a rental property that has an EPC rating of below ‘E’, what are your options?

To start with, you have a responsibility by law to carry out the changes suggested in your EPC report to improve the energy rating of your property. The law states that landlords should spend up to a maximum of £3,500 on the energy efficiency improvements set out in the EPC. Yet, if by spending £3,500, that improves your EPC rating but doesn’t mean you reach the ‘E’ rating, whilst you will still be expected to improve the rental property and spend the money, you will be able to apply for a high-cost exemption via the PRS Exemptions Register and still let the property (even though you will have an EPC rating of F or G).

It must be noted that some properties are exempt from the MEES legislation. If your property is listed or protected and the improvements would unacceptably alter it, it is exempt from EPC requirements.

Once your EPC has been registered, it is then valid for ten years. Because the EPC regulations came into force in 2008, there will be some rental properties that had their initial EPC and not had it renewed on its 10^th birthday. Now as a Southampton landlord, you do not need to get a new EPC if your EPC reaches its 10^th birthday, unless that is, you are starting a new tenancy with new tenants. The issue is…

 of 24,449 rental properties in Southampton, 8,199 of them have an EPC that is 10 years or older which has not been renewed

If you are a Southampton landlord and your EPC is 10 years old (or older) and your tenant leaves, you will require a new EPC, because if you don’t, you will be fined £5,000. If all those buy-to-let landlords in our local authority area ignored that law, accumulatively they could be fined £40.9m.

 Secondly, what about Southampton homeowners and the mortgage companies?

Under new legislation being considered, homeowners living in poorly insulated and draughty homes (meaning they would have a low EPC rating) could pay more for their mortgages and lose value from their Southampton homes under Government plans to prioritise mortgages on properties with high energy-efficiency ratings.

 There are 19,625 properties in Southampton with a rating of ‘E’ or below

The Department of Business (DoB) wants to force mortgage providers to classify the energy ratings of their borrowers’ homes and put the average into a Government league table, which will be presented on the DoB’s website. Mortgage providers will then get time sensitive targets to improve their average EPC scores, punishable by fines, meaning this would increase the mortgage costs for those with low energy efficient homes.

Maybe it’s time you looked at your EPC certificate and find out how you can improve your rating? If you are a Southampton landlord or Southampton homeowner and would like to chat about your legal position or would like a copy of your EPC emailing to you, don’t hesitate to drop me a line and I will be more than happy to discuss your personal circumstances further without obligation.

So, is it right Southampton landlords should have to fork out to improve the energy performance of their rental property, yet they aren’t the ones benefiting? Also, should Southampton homeowners have to have higher mortgage payments in the future because they have a low energy-efficient home?

 

Let me know your thoughts.