For commercial and residential landlords, keeping your property compliant with regulations is key to maintaining your income stream. Since 2018, all rented properties must have a minimum energy performance certificate (EPC) rating of E or higher.
Additionally, the government has plans to raise the bar even higher, with all rental properties expected to require at least an EPC rating of C by 2030. If your property doesn’t meet those criteria, you’ll need to carry out works to improve energy efficiency before you can offer a new lease.
How to improve your EPC rating
When your property was last assessed for energy efficiency, you will have received a report alongside your rating certificate which details specific changes you could make to your property in order to improve its rating. This is your most valuable asset in improving energy efficiency, as these recommendations will be tailored to your property instead of being vague or generalised advice.
Can’t find your certificate? Don’t worry. Although specialised advice is the best option, you should be able to find actionable points in general recommendations as well. The Energy Saving Trust advises:
- Switching to LED lighting
- Insulating hot water cylinders
- Installing and using heating controls
- Upgrading the boiler
- Getting double glazing
- Adding insulation to the loft, cavity walls and under the floors
- Investing in solar panels.
Some of these recommendations represent more significant costs than others, so it’s worth starting with the less expensive options. But even if your property needs more extensive changes made, remember that there are big benefits to improving your EPC rating.
Why is [your property’s] EPC important?
The short answer is that a higher EPC rating (i.e., closer to A or A+) makes your property more attractive to tenants or prospective buyers. This is because higher energy efficiency means lower energy bills and less of an impact made on the environment.
For tenants, the benefits of lower energy bills are obvious, as this can be one of their biggest costs after rent. Some tenants may even be willing to pay higher rents for a more environmentally friendly abode, as sustainability and eco-consciousness become more popular.
If you’re a property developer, or you’re simply looking to sell up and get a new property elsewhere, then upgrading your energy efficiency can boost the sale price considerably. Some investors even do this routinely – purchasing low energy efficiency buildings at low prices and then improving them. If this is your plan, then a commercial bridging loan can be used to upgrade the property, paid off with profits from the sale.
It’s also worth considering this option if you’re a buy-to-let landlord looking for a new property. Buying cheap for a low efficiency property could pay dividends if you can boost the efficiency and lease it out for a higher rent.
And, of course, we’ve already mentioned the legal requirements for energy efficiency. If your property doesn’t meet the current standards or you’re worried it might not at your next evaluation, then improving the property’s energy efficiency is vital.
How to finance EPC rating improvements
For some, a commercial bridging loan can be a good way to finance improvements, particularly if you’re making those improvements with a view to selling the property. But what if you’re expecting the rewards of your efforts to come a little more gradually, such as through increased rent or reduced energy costs, or if you’re making improvements just to meet legal requirements?
A bridging loan isn’t right for you if you think it’ll take a long time to pay back the funds. Instead, remortgaging your property may be a better choice. Remortgaging can allow you to release equity from your property – i.e., to receive a lump sum payment of the proportion of your home’s value you already own. This money can be used to pay for renovations, including energy efficiency improvements.
Releasing equity may mean higher mortgage payments, a longer mortgage term or higher interest rates – so it’s worth taking the time to think about the decision before committing. But if you’re in need of funds to support property improvements, then you shouldn’t ignore this potentially lucrative option.
There are multiple ways you can use finance to improve your property’s EPC rating if you don’t have the liquid assets to hand. Get in touch today for expert help in weighing up your options.
