The Scottish Government, in its efforts achieve Net Zero emissions in Scotland’s buildings, will introduce regulations in 2025 requiring all privately rented properties to reach a minimum EPC rating of ‘C’ by 2028 where technically feasible and cost effective at a change in tenancy. The current average EPC rating in Scotland is a rating of ‘D’.
The Scottish Government has identified a prioritised list of improvements that would make the most impact while keeping costs and disruption to a minimum. However, it will be up to the property owner to decide what they wish to do.
Similar regulations are set to be introduced to owner-occupied private housing by 2033 so that these properties also meet a similar standard.
What is an EPC?
An Energy Performance Certificate (EPC) gives an indication of how energy efficient a property is. The certificate will advise what rating the property is currently at and what its potential could be.
EPCs are required when marketing a property for sale or rent and must be at less than ten years old at the point of advertising. The purpose is to give potential purchasers and tenants a better idea of what it will cost to run their new home.
The rating given will be dependent on how well insulated a property is, if the windows are double or single glazed, how old the boiler is, what material the building is made of, ventilation of the property, the type of lighting and the property size.
To improve an EPC rating, property owners may have to provide adequate insultation, upgrade the boiler, assess whether the windows could be improved and generally just look over the property to determine areas of improvement.
Who does this effect?
This move will likely affect several groups very differently. The first being the landlords of privately rented properties who, at the change of a tenancy, will have to fork out cash to make the improvements. They will also have an extended period where they may not have a tenant due to the improvements being carried out.
The Scottish Government has advised that the improvements can be carried out in between tenancies. However, it is often the case that when one tenancy ends another begins, back to back. This would then mean that landlords would have to plan for a break in tenancies in order to have the time to schedule improvements.
The second group affected would be the tenants who will be able to enjoy these benefits by likely having a warmer home and lower bills due to having more efficient systems or using less heating etc. However, it is possible that an increase in rents will be seen as landlords look to recover some of the costs of improving their properties. In the same breath however, a more energy efficient property is likely to be more attractive to prospective tenants as people become ever more conscious of the rising costs of running a property.
Further it is likely to affect purchasers who plan to buy a property in order to rent it out. In this situation the purchaser would want to carefully consider the current EPC rating and the costs that may be incurred to improve the rating in order to rent the property. This may mean that the purchaser will have a longer period of time where the property is vacant whilst improvements are being made, all the while the mortgage payments will still be due, with no rental income to help with this.
Purchasers who are looking to buy for themselves, for residential use, in the coming years may also begin to pay closer attention to the EPC ratings of properties. This would be wise given that in their time of owning the property it would be likely that if the property has a poor EPC rating, then they may be liable for the cost of improving that rating.
Lastly, those selling properties may want to consider how the EPC rating will affect the property’s value, particularly in areas where properties are often bought as ‘buy to let’ properties. In addition, with the Scottish Government looking to introduce similar regulations for owner-occupied properties by 2033, those looking to sell in the future may wish to consider whether it is worthwhile carrying out the improvements themselves ahead of time. It may be the case that purchasers will start to think about this themselves and be looking for properties that are more energy efficient in order that they don’t have to make changes after moving in.
If you are looking to purchase a property on a buy to let basis or simply looking to buy or sell in the near future and would like to find out how our property team can help, contact us on 03330 430150.
