Why act now?
Under the current rules, EPC ratings are calculated using a single measure: the running costs of heating, lighting and hot water.
When the HEM system takes over, one measure becomes four:
- Fabric performance: how effectively the property keeps heat from escaping through the walls, insulation, windows and doors.
- Heating system: how environmentally friendly the system is, favouring heat pumps over gas boilers (gas currently scores higher under the old system because they are cheaper to run).
- Smart readiness: how well the property generates, stores or self-regulates and manages its own energy needs using technology such as solar panels, electric vehicle chargers and smart meters.
- Energy cost: how much it costs to run the property.
Landlords’ properties must meet two of these measures: first, a C in fabric performance, and then either a C in the heating system or smart category after.
Landlords will be expected to spend up to £10,000 per property to comply with MEES, with some exemptions allowed. Acting now means landlords could spend a lot less.
Dan Clinton, the head of buy-to-let at The Mortgage Works, part of Nationwide, said: “When the proposed new EPC methodology becomes mandatory, heating system or smart upgrades will be needed alongside the fabric improvements, which means securing a C rating under the current methodology is likely to be a more cost-effective route than under the new regime.
“As a result, it’s better to make the changes sooner because under the proposed transitional arrangements, certificates that achieve a C rating before October 2029 will remain valid for their full 10-year life under a ‘grandfathering arrangement’.”
When the EPC expires, the property’s rating may fall if it does not meet new requirements. Landlords may choose to sell up before that time comes and cash in on their “C” status.
Nationwide figures show that buy-to-let investors are already prepared to pay a 3.7pc premium for a C-rated property, compared to one rated D. And for those rated A and B, the price shoots up by more than 12pc.
The building society says that, as we approach the October 2030 deadline, it is possible there could be a further rise in premiums, particularly for C-rated properties.