Funding works required to meet EPC requirements

Many landlords have already started undertaking works on their properties to ensure portfolios meet current and future EPC requirements. But how are they funding the required works and are all landlords planning ahead?

 

Since autumn 2022, the financial options available may not be as varied and readily available as they once were, but this isn’t to say finance isn’t an option. Many landlords are looking at alternative ways to raise capital to cover the cost of works.

 

Rising interest rates

• Refinancing the existing first charge mortgage may no longer be an option based on increased affordability calculations.
• Clients may not wish to disturb an existing low fixed rate that still has a few years before expiry.

 

This could make a secured loan a viable and suitable option to raise monies against BTL property or your home, securing funding behind an existing first charge to cover property improvements.

 

Extensive work required – refurbishment loan

Where the works required to refurbish the property sufficiently to meet new EPC requirements are outside that allowed by an existing lender, many landlords may need a short-term finance solution to release funds against the subject property (or their wider portfolio).

 

Terms can be structured to cover the full costs of the works, even taking additional charges against other property to provide further value to support a transaction where needed.

Refurbishment loans can be structured against the existing value of the property, cost of works and post-works value, with any initial loan to include outstanding debt, before refinancing on to a new BTL mortgage against the enhanced value.

 

 

 

EPC ratings – what landlords need to know

 

Landlords could face big penalties if their properties are not energy efficient with new minimum standards to be introduced.

 

Currently, all rental properties should have an EPC rating of E as a minimum. But that is set to change in 2025 with fines of up to £30,000 for those who don’t comply.

 

What is an EPC rating?

 

Essentially, it is an indicator of the energy efficiency of a building. The ratings, which run from A to G (with G being the least efficient) are colour coded, red to green.

 

Factors that decide the rating are the amount of energy used and the level of CO₂ emissions.

 

How do I get an EPC rating?

 

This can be done with an Energy Assessment Survey carried out by a registered assessor. The cost varies so it is worth looking around.

 

The assessor will visit the property and produce a report indicating the current EPC rating with advice on how to improve it.

 

What are the Government’s plans?

 

From 2025, all properties with a new tenancy will have to have an EPC minimum of C. For existing tenancies, no matter how long they have been in place, the intention is to introduce this EPC minimum by 2028.

 

What does this mean for landlords?

 

It’s important for landlords that they make the necessary changes to bring their properties up to the necessary standard.

 

Research last year from Shawbrook indicated that around 25 per cent of landlords said their properties were rated at D or below with a similar number saying they were unaware of the planned changes.

 

Examples of improvements that can be made include: insulation; low energy lighting; solar PV panels; and smart heating controls. As some landlords may be looking at major work to improve the energy efficiency of properties, they are being advised to look at funding streams sooner rather than later.

 

Landlords who fail to comply with the requirements – and do not have a valid exemption – will face fines of up to £30,000.

 

If you are looking to access funds for improvements, speak to a member of the Omega team today.