How might the proposed changes to energy performance certificates (EPC) and the minimum energy efficiency standard (or MEES) affect you?
What is an EPC and when are they required?
Residential rental properties require an energy performance certificate (EPC) for letting and marketing. It identifies both the current energy efficiency of that property, and its potential improved energy rating, should adaptions be implemented. This could include installing draught proofing or changing light bulbs. The energy rating runs from A to G, with A being the most energy efficient. For properties in England and Wales, the average energy rating is D. An EPC lasts 10 years, although if a tenant remains in occupation beyond the expiry date, there is no current need to get a new EPC for the remainder of that letting. Properties let to the same tenant since 2008 are outside the scope of the EPC regime.
What energy efficiency standard is required?
The minimum energy efficiency standard required for residential letting is E. However, there are some exemptions. Listed buildings and buildings in conservation areas are special cases, and exemptions to carrying out improvement works can be secured in certain circumstances, where the minimum energy efficiency standard is not otherwise met.
Why are EPCs a hot topic now?
In February 2025 a Government consultation, which proposes changes to the existing EPC regime, closed.
Legislation is awaited to implement proposed changes and there is a second consultation underway. The intention of the Government is to introduce changes to:
- when an EPC is required
- the function of the EPC; and
- what can be shown on the EPC
Expiry of an EPC is not a trigger event for a new EPC However, the consultation seeks for it to be so. Also, to reduce the period of validity from 10 years to 2, 5 or 7 years. It is understood that the Government favours a 5-year validity period. This could result in a landlord requiring multiple EPCs for a long-term letting to the same tenant.
Currently short term lets such as holiday lets, where the occupier is not responsible for paying separately for energy consumed, are excluded from the EPC requirements. The Government seeks to include them, service occupancy and licence arrangements within the EPC regime, necessitating the landlord or owner to obtain an EPC prior to marketing, and letting. Similarly, the exemption to heritage buildings and buildings let in conservation areas, would be removed, requiring them to have an EPC. Helpfully for landlords, the pre- 2008 subsisting tenancy exemption is expected to continue.
Why are these EPC changes important?
The metrics giving rise to an energy rating under the existing EPC regime are changing. Additional factors are proposed to be taken into consideration to calculate energy efficiency and impact. For example, energy cost, the fabric performance of the building, the heating system in place, the existence of solar panels and car charging, to name a few. Therefore, a landlord cannot and should not assume that the current rating of its property will remain the same when a new EPC becomes necessary. Investors in residential buy to let properties will need to be mindful of these changes, as a future reduced EPC rating could necessitate significant investment to meet the minimum energy threshold, prior to a new letting.
What are Minimum Energy Efficiency Standards?
The requirement for an EPC triggers the need for a let property to meet what is known as minimum energy efficiency standard (or MEES).
What is the next step?
There is a second Government consultation which closes in May 2025. By 2028 the minimum energy efficiency of a new residential property letting must meet a C rating (as opposed to the current E). Also, for existing tenancies, the C rating must be met by 2030.
There are several options under consideration in the consultation as to how rating C is met. There are various metrics that can be applied: fabric performance; smart readiness and / or heating system efficiency. Under consideration is whether the landlord has discretion which one or more metrics should be applied to meet rating C. For example, whether a combination of meeting the threshold on both fabric performance and heating system efficiencies, or just investing in one metric to meet EPC C. The concern is that some properties will be incapable of overcoming a C rating across all 3 metrics.
The proposal includes a cost cap on expenditure required to meet the MEES. By comparison to the current cap of £3,500 the Government consultation proposals a significantly higher cap, set at £15,000. The expectation is that investment from 2026, but prior to the new regime coming into force in 2028 / 2030, will be taken into consideration for the purposes of the cost cap, when a new EPC is triggered.
In recognition that £15,000 is likely to be unaffordable to many landlords, the Government is proposing a reduced cost cap exemption in circumstances that there is evidence of unaffordability.
Takeaways
The proposed changes are likely to require landlords in England and Wales to spend more money improving their residential letting properties. The increased expenditure to meet the MEES, in addition to other regulatory and legislative changes, will impact the profitability of residential lettings, or lead to increased rents to enable landlords to claw back the increased expenditure. The abolition of Section 21 Notices will impact a landlord being able to obtain vacant possession or control the timing of vacant possession, for the purpose of carrying out upgrading works to their letting property.
The £15,000 cost cap is a significant increase. The metrics methodology is still under consideration and so it is difficult to know what changes a landlord might be advised to implement now, or before 2028, to help meet the new minimum standards when they come into effect. It is available to you to respond to the consultation, to help frame what becomes the law in the future: Improving the energy performance of privately rented homes in England and Wales – 2025 update – Department for Energy Security and Net Zero – Citizen Space, email PRSMEESConsultation@energysecurity.gov.uk or write to Head of the Private Rented Sector Strategy, Department for Energy Security and Net Zero, 3-8 Whitehall Place, London, SW1A 2EG
If you require legal advice please contact me, Helen Williams, on 01392 401176 / h.williams@stephens-scown.co.uk