Staggering inaccuracies in EPCs undermine net zero efforts

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The Government puts its faith in EPC ratings to measure property energy usage in order to drive up energy efficiency in properties towards its energy targets, but can owners have the same faith?

Are EPCs as they stand robust enough? Do they give valid and reliable ratings when the Government uses these as its “North Star” to satisfy its legal commitment to net zero by 2050. Also as its legal standard for all sales and lettings, and increasingly they are used by lenders as a gateway to approve mortgages?

“Taxpayers, homeowners and landlords face paying billions of pounds to upgrade the energy efficiency of their homes – but the ‘staggering inaccuracy’ of energy certificates means the upgrades will make little difference to either climate change or energy bills.”

So says Martina Lees writing for The Sunday Times last week, based on the results of an in-depth study carried out by Climate Fintech company, Carbon Lance.

And they’re not on their own. Research carried out by property industry research and measurement group, SPEC, in their report “Impacts of inaccurate area measurement on EPC rating” concludes that of 2,500,000 EPCs lodged (15%) are incorrectly rated, having a score within 2 points of an upgrade or downgrade if measured accurately.

An estimated 35,028 E-rated properties are being let illegally, having borderline EPC scores that would likely be downgraded to F if their area was accurately measured, says SPEC.

Carbon Lance reckon, after comparing EPCs across 17,000 homes, that the average electricity and gas energy usage recorded was actually 91 percent lower that the figure predicted by the obtained EPC rating.

“The inaccuracy is ‘quire staggering’ says Madhuban Kumar founder of CarbonLaces. And apparently this inaccuracy, according to their figures, increases exponentially as the rating comes down the scale, grade G being the lowest rating with the highest inaccuracy.

Cursory inspections

What is often misunderstood about these these ratings is, they are set by assessors who do few if any actual energy efficiency measurements. It is very much an observation without doing any invasive checks, obtaining data often based on visual assumptions. No thorough testing whether there is or is not cavity wall or underfloor insulation for example, resulting in data fed into a computer program whose algorithm arbitrarily works out a score.

In the case of a domestic energy assessment, the assessor visits the property and carries out a non-invasive visual inspection looking into the characteristics of the property and how they might affect energy efficiency. Key features are noted such as the type of heating system, locations of radiators, sources of heat, areas of heat loss, insulation types, construction methods, types of glazing and doors etc.

The assessor measures the floor areas of rooms in the property, a key input to the EPC rating calculation. Their observations and size measurements are then typically entered into a software program, often on an application running on a tablet or mobile, which will then automatically calculate the EPC score and band rating for the property.

There are countless stories around of owners making so called improvements only to find their EPC rating has gone down when re-assessed. Fitting an electric boiler for example, going to LPG instead of natural gas or oil, can all negatively affect the EPC score.

The Sunday Times article also cites the issue of new build quality, where EPCs have been assessed purely on building plans, or by using just one sample property assessment on a new build estate to rate the whole estate.

The “gold standard”

Introduced in 2007 the EPC was to be the “gold standard”, helping people choose a property when renting or buying to gauge the cost of running a home. And the measure is beginning to gain traction among the buying and renting public who are beginning to rely on this information as their guide to energy efficiency.

It is also an increasingly important factor relied upon by mortgage lenders, most of whom will restrict loans to those with acceptable EPC ratings and some banks even adjust their lending rates depending on the EPC scores.

The UK Government has committed to reaching net zero emissions by 2050 and as such needs a measure to help it achieve this in property. This is a laudable aim, but its system of measurement needs to give valid and reliable results.

As part of the Government’s drive to net zero it is looking to reduce emissions across a wide range of sectors, including property. From April 2023 new rules on energy efficiency come into force in England and Wales.

Commercial property lettings

From this April it will be a legal requirement for all commercial rented properties to have an EPC (Energy Performance Certificate) rating of at least E. This is currently a legal requirement for commercial and residential properties for new tenancies or on renewal, but this requirement will be extended to both new and existing commercial leases too. All residential rented properties must already have a minimum rating of “E”.

Energy Performance Certificates (EPCs) are meant to determine how energy-efficient a property is from A (most efficient) to G (least efficient). They should also show the potential level of emissions plus recommendations and associated costs of improving the rating for that property.

Owners must now obtain an EPC whenever a property is built, sold or rented. Landlords contemplating an increase in the minimum EPC rating to “C” (possibly by 2025) potentially face large bills to ensure their properties are compliant.

Minimum energy efficiency standards

So, minimum energy efficiency standards (MEES) requirements will extend to all existing commercial leases from 1 April 2023 and the rating will rise in future, with the government currently consulting on its aims to bring the majority of properties up to EPC band C by the end of the decade.

Information collected by Handelsbanken, a local relationship bank operating in Sweden and in the UK, obtained by research into the UK market to find out how prepared landlords are to meet the new regulations, found that:

• In order to meet the new EPC legislation changes 95% of commercial landlords will need to make improvements to their properties, with installing insulation (30%), double glazing (27%) and a new, energy-efficient boiler (26%) the most likely upgrades
• The anticipated cost of this investment is set to be £95,400 per corporate commercial landlord – or 3% of the total portfolio value
• Nearly a quarter of commercial landlords (23%) were not aware that this legislation was coming into effect
• One in nine (11%) plans to sell any properties with a rating of less than E as they cannot afford to make them more sustainable, while only 5% have properties with an E or below rating
• The main issues preventing landlords from making their portfolios more environmentally sustainable are not having enough knowledge (50%), regulations making it too difficult (48%) and not being able to access finance (18%)
• However, 67% of landlords believe that their portfolio is already sustainable enough.

Residential property lettings

As for EPCs for residential rental properties, the government began a consultation in 2020 about updating the MEES rules and came up with some new proposals such as reaching EPC “C” by 2025 for new lettings and 2028 for existing lettings. These proposals are not yet in law.

The cost cap to help landlords finance the improvements needed to reach the required standard would under the proposals be raised from £3,500 to £10,000 per property. The government has estimated that this would be sufficient to bring more than 90% of D-rated properties up to a C rating, as well as nearly 60% of E-rated properties. It’s not clear yet whether existing spending would count towards the new cap.

In addition, guidance is being issued on the priority routes to improvements in residential properties known as a “fabric first” policy to control the order work is carried out. Improvements to the fabric of the building (ie insulation, windows and doors) would be prioritised before other additional measures, such as new heating systems, solar, heat pumps etc are installed.

More accurate EPCs

The Government has instigated a review and EPC action plan designed to deliver an EPC system that produces accurate, reliable, and trusted EPCs. Actions delivered to date, says the Government “ include the new Energy Performance of Buildings Register (‘the Register’) designed according to government standards and extensively tested with Register users; the implementation of EPC lodgement rules that help prevent lodgement errors; and the publication of a consultation on options for the introduction of a new performance-based operational ratings scheme for non-domestic buildings.”

OPINION: The EPC ratings system is “not fit for purpose”

View Full Article: Staggering inaccuracies in EPCs undermine net zero efforts

Build to rent is UK’s fastest growing housing sector

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Build to rent (BTR) is growing more rapidly than any other housing sector, according to a new report.

The British Property Federation (BPF)’s Build to Rent Q3 2022 report revealed growth of 15% year-on-year, with more than 240,000 homes either in planning

View Full Article: Build to rent is UK’s fastest growing housing sector

This company will sell your tenanted properties fast – in just 28 days so you can exit your portfolio

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We’ve all seen the news, with changes in regulations and tax and interest rate rises, landlords have been flocking to sell their property portfolios.

But with so many properties, all full with tenants, some of them with problems, low rents or even rent skipping, how can you get out fast?

The answer is: Landlord Sales Agency. We know the mammoth effort it takes to get rental properties ready for sale, to market them, to liaise with tenants or worse, evict tenants.

That’s why from the moment you contact us, our team takes everything off your hands. We know exactly what it takes to sell tenanted properties, fast, and the results from landlords who have contacted us speak for themselves – most of our property portfolios sell in less than 28 days.

It might seem too good to be true in this current market where landlords are struggling to get out, but for us at Landlord Sales Agency, it really is that simple.

Our team of incredible portfolio exit specialists deal with every single issue, liaise with your tenants, collect all the materials for sale, arrange viewings and even assist with out of date certificates or repairs on the properties.

Tenants are no issue – in most cases, our huge private database of new landlord buyers queuing up to buy and our extensive network of the top property buying companies means that we’re able to sell your properties tenanted with zero hassle. In some cases, our buyers are so confident with our process, they don’t even need a viewing to buy.

This, combined with our modern auction techniques which create a bidding war on your properties to drive up prices, mean that we really will get you the best possible price in the fastest possible time, allowing you to relax from the moment you call us and knowing that you’ll have exited your property portfolio with the money in the bank in weeks rather than months.

• Landlord Sales Agency have a powerful database of over 30,000 private buyers and portfolio buying companies who want to buy whole portfolios straight away,and who are alerted every time we have a portfolio to sell

• We focus on a quality fast sale, rather than a cheap fast sale and ensure that our buy-to-let portfolios are sold fast, often in less than 28 days. We also ensure that we never compromise on the sale price no matter how much work your portfolio needs.

• We typically achieve 80 – 90% of the market value, and for that we cover all the costs and take away all the hassle that comes with selling the portfolio. We’re completely transparent, so you know exactly what we’re making. You won’t get a higher price for the service, and any company promising you 100% market value is hiding a huge list of costs that are going to come after the sale. That’s not the case with us. It’s what makes us different.

• We’re a company created by landlords for landlords, so we now exactly what you need to do to overcome all the hurdles and release you from financial stress, including rising taxes, interest rates and bills. In some cases we’re even able to help out with cash advances.

• There’s no one like us out there, and we’ve built up an unbeatable record for helping landlords which is why we’re the number one go-to company for our partners, including LandlordZONE

We’re so confident in our ability to sell tenanted properties in a matter of days and, at the very most, weeks, that in the cases where the buyers do want your properties empty, we even work with tenants to help them find new accommodation plus in some cases pay for their deposits and first month of rent to ensure they’re able to leave fast, and they’re happy knowing they’re safely in a brand new home.

No one else goes as far as we do to get you exactly what you need. That’s what makes Landlord Sales Agency the unbeatable solution out there for landlords looking to sell.

So if you’re looking sell your buy-to-lets, let us take the stress off your hands and get you the best price, no matter what condition your portfolio is in.

Contact Landlord Sales Agency:

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View Full Article: This company will sell your tenanted properties fast – in just 28 days so you can exit your portfolio

‘Link landlord EPC costs to rents instead of £10k cap’ politicians told

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Landlords’ financial contribution to upgrading properties in Wales should be linked to average market rents in any given area, suggests the NRLA.

Under its proposals, landlords would need to contribute a minimum of £5,000, while those renting properties in areas with higher average rents would need to contribute more, gradually tapering to £10,000.

The NRLA believes the proposed £10,000 cost-cap on energy efficiency upgrades is uneconomical in a region where some properties might not meet the required standard.

Ineffective

It says the MEES (Miniumum Energy Efficiency Standard) is ineffective, especially in Wales, given the prevalence of older properties which cost more to upgrade to a higher EPC band.

The cap could represent a significant proportion of the value of the average property and would drive landlords out of the market.

NRLA chief executive Ben Beadle says the government fails to accept the realities of different property and rental values across the country, and that the private rented sector contains some of the most difficult to retrofit homes.

He adds: “Ministers need a smarter approach with a proper financial package if we want to ensure improvements to the rental housing stock.”

A new report from Members of the Senedd has taken the NRLA’s comments on board and suggests that the Welsh government should instead consider tax incentives in the PRS, arguing that ministers could look at how to use council tax and the land transaction tax to incentivise energy efficiency retrofit as a priority.

The report also warns: “While the UK government continues to drag its feet over whether to increase standards in the private rented sector, the sector remains in limbo.”

In its evidence, the Chartered Institute of Housing says there is significant evidence that MEES is currently poorly enforced. It calls for the development of “an effective national MEES compliance and enforcement database and tools”, which could be delivered across Wales.

Read all our stories about MEES.

View Full Article: ‘Link landlord EPC costs to rents instead of £10k cap’ politicians told

WARNING: Rent reforms ‘could reverse RRO court judgement’ for landlords

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Superior landlords could find themselves hit by Rent Repayment Orders if the government decides to amend the upcoming Renters Reform Bill.

Property lawyer at JMW, David Smith (main picture), says that despite the Supreme Court’s ruling in the case of Rakusen v Jepsen- that an RRO cannot be made against a superior landlord but only against the immediate landlord of the tenancy that generates the relevant rent – there was still uncertainty.

“I could see interested MPs laying down amendments to the Bill to mute this judgement,” he tells LandlordZONE. “Whether they would be accepted is another matter.”

Sanctions

The Justices said there was a range of other sanctions available to combat rogue landlords, including fines, civil penalties and banning orders, but that it was ultimately up to Parliament to decide whether these were sufficient.

Smith adds that it was gratifying the Supreme Court acknowledged his intervention on behalf of the NRLA and accepted their argument, name-checking the landlord body in its judgement.

The NRLA had pointed out the full range of penalties currently available to prosecute errant landlords and explained: “It might be thought that [the] prospect of a property owner entering into such an arrangement solely to evade a potential RRO, while simultaneously leaving themselves open to prosecution for criminal offences, is a little far-fetched.”

Directors

Smith says he would prefer to see a change in the law, making directors of companies liable for Rent Repayment Orders, to address the issue of rent-to-rent operators setting up front companies that go bust rather than pay the penalties.

“That could then be easily rectified as you could prosecute directors of companies for failure to licence,” he adds. “It wouldn’t be a huge change to direct an order against a director instead.”

The justices in the Supreme Court case were told this too by one of the lawyers, who pointed out that rent-to-rent companies often ‘disappear’ once deals go south, only to phoenix with the same directors a few months later.

View Full Article: WARNING: Rent reforms ‘could reverse RRO court judgement’ for landlords

NRLA hails landmark ruling on rent-to-rent companies

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A landmark ruling from the Supreme Court has been welcomed by the National Residential Landlords Association (NRLA) that delivers clarification about the responsibilities of so-called ‘rent-to-rent’ companies.

These companies take over the running of a property for a landlord.

View Full Article: NRLA hails landmark ruling on rent-to-rent companies

BREAKING: Supreme Court rules that ‘superior landlords’ not liable for RROs

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The Supreme Court has ruled that Rent Repayment Orders cannot be made against a superior landlord.

The landmark ruling has implications for rent-to-rent arrangements and means tenants cannot go after superior landlords – property owners or leaseholders – when seeking redress.

It is good news for those who find their property has been sublet unknowingly in rent-to-rent set-ups but not for tenants who struggle to take dodgy companies to task.

The case concerned landlord Martin Rakusen, the leaseholder of a flat in Finchley Road, London, who granted a tenancy to Kensington Property Investment Group which then let out the property without an HMO licence. The tenants applied to a First Tier Property Tribunal for a rent repayment order of £26,140 against Rakusen.

He challenged the order, arguing that it could only be made against the immediate landlord of the person making the application.

Dismissed

The Upper Tribunal dismissed his appeal, but the Court of Appeal subsequently found in his favour, agreeing that an RRO could not be made against a superior landlord.

The Supreme Court was unanimous in its decision that a RRO cannot be made against a superior landlord but only against the immediate landlord of the tenancy that generates the relevant rent.

The Justices said: “It would therefore be unnatural to interpret ‘landlord under a tenancy’ as referring to any landlord other than the landlord of the tenancy which generates the rent of which repayment is sought. It would strain the language to say that a superior landlord is ‘repaying’ rent to a tenant from whom it had never received any rent.”

They added that the law’s purpose was to restrict RROs to those who directly benefit from the payment of rent and that there were already a range of other sanctions available to combat rogue landlords such as fines, civil penalties and banning orders.

Fears

The NRLA had feared that it the case had gone the other way, then authorised rent-to-rent arrangements would have become less common, leading to a lower availability of budget accommodation to rent on a room-by-room basis.

NRLA chief executive Ben Beadle (pictured) welcomes the judgement and adds: “The ruling makes clear that it is the responsibility of rent-to-rent companies acting as a landlord to ensure that relevant legal requirements are met, since it is they who receive tenants’ rent.

“t is simply not right that such companies can take money from people without any responsibility for the property they are running.”

Paul Shamplina of Landlord Action (pictured), says: “This is great news for landlords and it’s clear the court has used common sense in realising that the contract was between the rent-to-rent operator Kensington Property Investment and the tenants, not the ‘superior landlord’ Mr Rakusen.

“Great work by the NRLA and David Smith, which sets a good precedent and will stop future spurious RROs being made in the future against head/superior landlords who are not involved in the transaction with the tenant, which has happened many times in the past.

“There remains a lot of work to be done on the rent-to-rent industry largely because there are so many rogue operators within it.”

View Full Article: BREAKING: Supreme Court rules that ‘superior landlords’ not liable for RROs

House prices fall for the first time since June 2020

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The UK’s house prices have recorded their first annual fall since June 2020 after dropping by 1.1% year-on-year in February, Nationwide reports.

It is also the ‘weakest performance’ for prices since November 2012.

Prices between January and February fell by 0.5% –

View Full Article: House prices fall for the first time since June 2020

Landlords opting for fixed rate deals when remortgaging

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More than 75% of landlords expect to opt for a fixed rate deal when it is time for them to remortgage, a survey reveals.

The lender Landbay has revealed that five-year fixed rates are still the most popular option for landlords.

View Full Article: Landlords opting for fixed rate deals when remortgaging

Council wins £1m funding for HMO improvements

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As part of the Department for Levelling Up, Housing and Communities’ (DLUHC) “levelling up” fund the money is to be used by the council to “work proactively and engage with landlords”, in particular with those landlords who rent out houses in multiple occupation (HMOs) and own converted flats.

Without stating this openly, the implication is that the council believes these are the properties where standards are likely to be below legal standards. The council has said it believes that privately rented homes are “a vital part of the housing mix, making up almost 20% of the housing in Cornwall.” but wants to encourage landlords to improve living standards for their tenants where necessary.

Cllr Olly Monk, with responsibilities for housing and planning has said:

“Residents are right to expect a decent home. There are many, many good and responsible private landlords out there who value their tenants and ensure that the home they rent out is of a decent standard.

“We are in no way tarring everyone with the same brush, but we also know from the complaints we receive and the enforcement action we have a duty to take, that there are properties being rented out that fall short of the required standard.

“We want to work with those landlords to improve the homes they rent out so that residents who live in them can feel assured that they are being listened to and action is being taken.”

What is an HMO?

The Housing Act 2004’s definition of a house in multiple occupation (HMO) is defined as a building falling within one of the following categories:

• any building or flat where two or more households share a basic amenity. This can be a bathroom, toilet or cooking facilities

• a converted building not entirely comprised of self-contained flats

• some converted blocks of flats where the standard of the conversion does not meet the relevant building standards and fewer than two-thirds of the flats are owner-occupied
• a building that has been declared an HMO by the local authority

The rules are quite complex and obviously given this last point, there is some flexibility on the HMO designation by the local authority.

This HMO designation applies to the most common type of HMO, shared houses by more than one household, such as students, holiday workers, and purpose-built bedsit accommodation. It may also apply to a hostel if the accommodation does not entirely comprise of self-contained units.

Mandatory Licensing for some HMOs

Mandatory licensing applies to HMOs where they are occupied by five or more persons living in two or more separate households. Children of any age also contribute to the number of occupants. Otherwise smaller HMOs may or may not be licensable, but some are under local authority discretionary or additional licencing schemes – you should check with your local authority.

Mandatory licencing comes under the The Management of Houses in Multiple Occupation (England) Regulations 2006 as amended for room sizes and waste disposal in 2018

All licenced HMOs must have:

• a current gas safety certificate if there is a gas supply
• all electrical appliances and furniture supplied must comply to regulations and be maintained in a safe condition
• smoke alarms must be provided for each storey of the property containing living accommodation and maintained in working order
• the landlord must declare on demand, to the local authority, the safety of electrical appliances, furniture and condition and positioning of smoke and carbon monoxide alarms
• occupants must be given a written statement of the terms of occupancy
• a carbon monoxide alarm must be installed in every room used as living accommodation in which there is a fixed combustion appliance.
• after 1 October 2018 minimum size requirements apply to all rooms used as ‘sleeping accommodation and landlords must ensure that no room is used by more than number of persons specified in the licence.
• There are also rules relating to the storing and disposal of household waste generated by HMOs.

A Landlord’s Guide to Standards in houses in multiple occupation (HMO) (pdf download)

How is the Cornwall “levelling up” funding to be used?

The funding will be used initially to gather information about the conditions in certain groups of privately rented properties, HMOs being the target group.

The Council will then engage with these landlords in order to work with them to improve any poor living conditions. It is recognised that some private renting tenants in Cornwall are living in sub-standard accommodation. It is anticipated that some cases may need to involve formal enforcement action.

Some HMOs in Cornwall are linked to commercial premises including restaurants, takeaways, hotels and resorts and some contain poorly converted self-contained flats existing within tourist areas and areas of high deprivation.

Cllr Monk has said that:

“The private rented sector is very important in providing much needed housing however, we have a duty of care to residents and the council is committed to driving an improvement in standards.”

The Council’s project therefore will attempt to identify these specific types of properties in need of further attention, followed by an assessment of how best to engage with landlords to raise standards.

Cllr Monk added:

“This is about finding new ways to identify properties where our intervention is most needed and then to engage with landlords to make sure they are aware of their responsibilities and helping them to ensure their properties meet expectations. We are here to help both tenants and landlords.

“This additional funding will allow the Council to do more than just fulfil our statutory obligations such as HMO Licensing and responding to complaints from those facing hazardous property conditions.”

HMO regulations are complex and regulations change on a regular basis, so always check with the local authority concerned regarding the current legal requirements for your house in multiple occupation

View Full Article: Council wins £1m funding for HMO improvements