EPCs & buy-to-let finance: What landlords need to know

Energy Performance Certificates are vital documents for landlords that rate a property's energy efficiency from A (most efficient) to G (least efficient). Introduced in 2007, EPCs have become increasingly important in the private rental sector, with significant regulatory changes on the horizon.

Since April 2020, landlords with properties in England and Wales have been prohibited from letting properties with an EPC rating below E, including existing tenancies. This minimum energy efficiency standard (MEES) means landlords must make necessary improvements before renting out properties that fall below this threshold. Exceptions exist where improvements aren't technically feasible or cost-effective.

EPCs remain valid for 10 years and must be provided to prospective tenants before a tenancy begins. Failing to provide an EPC can currently result in penalties of up to £5,000 for domestic properties.

Beyond legal compliance, EPCs offer several benefits for landlords:

• Property value: Energy-efficient properties often command higher market values and rental rates.
• Tenant attraction: Increasingly eco-conscious tenants favour properties with lower energy costs.
• Reduced void periods: Properties with better EPC ratings typically let faster.
• Environmental impact: Improved energy efficiency reduces carbon emissions.

The certificate includes recommendations for improving energy efficiency, with estimated costs and potential savings, providing landlords with a roadmap for beneficial upgrades.

The UK government has proposed significant changes to EPC requirements set to take effect in 2028:

1. Higher minimum standard: The minimum EPC rating for rental properties is expected to increase from E to C. This represents a substantial jump in energy efficiency standards.
2. Cost cap adjustment: The cost cap for required improvements may increase from the current £3,500 to potentially £15,000, meaning landlords might need to invest significantly more in property upgrades.
3. Tighter compliance timeline: New tenancies may need to comply by 2028, with all existing tenancies meeting the new standard by 2030.

As the property sector continues to shift toward more sustainable practices, lenders are increasingly playing a role in encouraging landlords to invest in greener properties. Currently, buy-to-let lenders fall into four broad categories based on how they support environmentally friendly improvements:

These lenders offer reduced rates from their core product range when landlords present properties with high EPC ratings (A–C) at the time of application.

Example: Paragon Bank offers a 0.05% discount across much of its core range, for properties already rated A–C.

Some lenders provide increased borrowing capacity for energy-efficient properties. Typically, their standard LTV cap might be 75% for properties rated A–E, but they’ll extend this (e.g., to 80%) for properties rated A–C.

Example: The Mortgage Works offers up to 80% LTV for properties rated A-C.

These lenders incentivize landlords to upgrade their property’s energy performance during the mortgage term. Upon evidence of improvement to an A–C rating, they may offer cashback or partial fee refunds.

Example: Shawbrook Bank provides a partial refund of the original lender fee paid if the EPC rating is upgraded to A–C during the initial product period.

This group currently does not offer any green incentives or products. However, given the increasing pressure from regulators, investors, and the market, it’s widely expected that many of these lenders will adopt green-friendly policies in the near future.

Landlords should consider taking proactive steps:

• Review current EPCs: Understand your properties' current ratings and when certificates need renewal.
• Plan improvements strategically: Consider implementing recommendations during natural void periods or alongside other maintenance work.
• Budget for upgrades: Common improvements include insulation upgrades, heating system replacements, and installing double glazing.
• Explore available funding: Research government grants and incentives that might offset improvement costs.
• Consider long-term investment: Properties that can't feasibly reach a C rating might require strategic decisions about their future in your portfolio.

EPCs have evolved from simple information tools to significant regulatory instruments in the UK rental market. With the proposed 2028 changes, they're set to become even more critical for landlords. While the higher standards present challenges, they also offer opportunities to improve property values, attract quality tenants, and contribute to national carbon reduction goals. Forward-thinking landlords who start planning and implementing improvements now will be better positioned when the new requirements take effect.

Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact NRLA Mortgages.

This is an advertisement only and in no way should be viewed as a personal recommendation or advice. Before a recommendation of the suitability of the product can be given, we will direct you to 3mc (UK) Limited who can provide specialist mortgage advice. As part of this they will ask questions so that they can fully understand your circumstances before giving advice.

NRLA Mortgages is a trading name of LPTE Limited which is an Introducer Appointed Representative of 3mc (UK) Limited who is Authorised and Regulated by the Financial Conduct Authority and is entered on the FS Register under reference 302992.

Please note: 3mc can advise/arrange Business Buy to Let (BBTL) and Consumer Buy to Lets (CBTL). Of the two, only Consumer Buy to Lets are regulated by the FCA.

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