Energy performance of your buy-to-let property

Energy performance legislation places a number of requirements on private landlords with regards to energy efficiency improvements.

The following rules have been in effect since 9 January 2013:

  • An EPC must be provided, free of charge, to any prospective tenant, and a copy must be made available to the person who takes up the tenancy
  • Third parties such as letting agents must ensure that an EPC has been commissioned before the property can be marketed
  • All marketing in the 'commercial media' (newspapers, magazines, online and written material produced by their landlord or their agent) must display the energy rating of the property being advertised

This means that your property's energy performance will be one of the first things prospective tenants see. As energy performance is a big deciding factor in which property tenants apply for, you will probably wish to ensure that your property is as energy efficient as possible.

Your existing property portfolio

Many landlords own terraced properties. They are attractive to tenants in terms of space, tend to be located close to city centres and can be readily converted into HMOs. However, those that have not had improvements made - particularly those older than half a century - tend to be poorly insulated and very energy inefficient.

Insulating wherever you can will be extraordinarily beneficial to your energy performance rating. This includes loft, cavity wall, solid wall, floor and hot water system insulation and draught proofing.

Fitting a condensing boiler can also be beneficial. Since 2005, most new gas boilers fitted in England and Wales have been condensing boilers, and whilst these are not tax-deductible, the initial outlay could be recouped in energy savings during voids and the added attraction an energy-efficient property has to tenants.

Additionally, replacing single-glazing windows with double or triple glazing can keep down your property's energy costs, and are among the top things that tenants look for (heat saving, security and reduction of outside noise all making them a very popular feature).

Our article 'home renovation grants and housing renewal funding' details funding available to landlords who wish to improve the energy efficiency of their property.

What if tenants want to carry out work themselves?

Regulations that came into effect on 1 April 2016 entitle tenants to request their landlord’s consent to make certain energy efficiency improvements to the property. A landlord will not be able to withhold consent if to do so would be considered ‘unreasonable’.

Read more: Buy-to-let guide for 2016 – New energy efficiency rules.

Tips for tenants (and for you)

There are a number of simple and inexpensive tricks to improve the energy efficiency of your property from which your tenant - and you, during rental voids - could benefit. Things that you could do include:

  • insulating water pipes and your water heater (if the heater is warm to the touch, it is inadequately insulated)
  • investing in insulated curtains or shades and keeping them closed when the property is vacant
  • fitting draught guards to exterior doors, windows, interior doors if necessary, and even your letterbox
  • installing energy-saving light bulbs
  • replacing washers on loose or leaking pipes and taps
  • installing a low-flow shower head
  • purchasing energy-efficient appliances - A-rated appliances can save a lot of money and improve your property's energy efficiency dramatically

Along with the welcome pack for a new tenancy, why not include a list of suggestions to help your tenants keep the bills low?

You could advise them to:

  • keep the windows shut and curtains drawn when they are out
  • make sure that the refrigerator is kept a few inches away from the wall, and that the coils on the back are kept clean
  • wash clothes on the 'cold wash' setting
  • unplug electrical appliances that aren't in use
  • make sure that their furniture isn't blocking any radiators or vents

We don't advise making these conditions of the tenancy - this will seem rather dictatorial - but your tenants will certainly appreciate a few friendly suggestions to help them save money, as well as the fact that you have also taken steps to do so. In following these suggestions, you and your tenants can save on bills and the efficiency rating of your property might also improve.

Future property purchases

Fortunately, adding energy efficient properties to your buy-to-let portfolio will be easier, as the new EPC regulations also apply to other sellers. As such, you'll know exactly how energy efficient any property you view is.

As energy inefficient properties will require work, an experienced investor or conveyancer might be able to negotiate the sale price downwards. In addition, light refurbishment mortgages are available from some lenders; these mortgages are assessed on a 'current' and 'after works' basis and an additional proportion of the 'after works value', initially withheld by the lender, will be released after the completion of the works.

This information should not be interpreted as financial advice. Buy to let mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.

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