New EPC Requirements Prompt Landlords to Consider Selling BTL Properties

Epc Requirements

Around 52% of UK landlords are seriously considering selling up as new regulations for Energy Performance Certificates are proposed.

All new rental tenancies will be required by the government to have at least a rating of C by April 2025, while existing tenancies’ ratings are expected to reach the same target by 2028 in order to meet updated energy efficiency requirements.

A survey of 600 landlords, conducted by TWM (The Mortgage Works), revealed that many felt they would not be able to meet the requirements in the timescale set out due to issues such as finances and the time needed to complete the work.

The current regulations set out stipulate that rental properties must have an EPC rating of E or above.

Landlords most likely to sell were those with larger property portfolios, with 58% of those with six to ten properties stating that they would be inclined to sell some, if not all, of their rentals. For landlords with twenty or more properties, the figure rises to 63% of those who would opt to sell. Those who took part in the survey who had only one rental property were significantly less likely to sell, with only 35% considering this option.

Head of lending at The Mortgage Works, Daniel Clinton, said: “With currently less than four years before all new tenancies need to be in properties rated EPC C or above, there are still landlords who need to undertake remedial work on at least one of their properties.”

“They are therefore understandably concerned about how they will both fund the work, find someone to do it, and have it completed in time.”

Daniel added: “The side effect of these concerns is that a significant number of landlords admit they are ready to give up and are already considering selling properties.”

“An unintended consequence of this sentiment could result in a backwards step in meeting the government’s target around climate change, for example, if these properties are taken up by the owner-occupier market, where there are currently no minimum energy efficiency requirements.”

The more properties, the more impact

Landlords with the largest portfolios will be the most impacted by the proposed changes, due to the increased number of homes that will need to be renovated and the associated costs.

Statistics revealed by the survey show that those with 4–5 properties were likely to need to renovate around 2 of those properties. This increased to 4 for those with 6 to 10 and 12 for landlords with 20+ rentals. 52% of landlords with a single property claimed to have already met the requirements, while 35% said their property currently sits between D and G ratings.

Do landlords know exactly what is required?

Respondents to the survey showed that 66% were aware that their properties would require upgrading to meet the targets; however, 33% of these admitted that they did not know exactly what renovations would need to be done.

Of those more familiar with the changes needed, 37% thought that insulation would be needed, 25% thought boiler upgrades were necessary, and 24% said refurbishing existing utilities would be the key change.

The figure for properties needing essential insulation rose to 59%, and those needing new boilers increased to 37% among those with a larger portfolio (twenty plus properties).

Renovation costs

According to research, the average amount that landlords keep aside for maintenance and upkeep costs for their rentals is £15,597. According to the survey, however, only 49% had these funds available, with the other 51% falling short and having around £10,000 on average.

Large portfolio landlords tended to have more funds available, with an average of £35,202.

Clinton said: “Financing is also key, and while our research suggests landlords have money set aside to deal with unexpected costs arising from their properties, it may not be enough to also cover energy efficiency improvements.”