What happens if the EPC requirement on HMOs changes to C during the rental contract?

What happens if the EPC requirement on HMOs changes to C during the rental contract?

0:02 AM, 14th June 2023, About 9 months ago 14

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Hello, I’m about to exchange on a six-bed (all with kitchenette and en suite shower) in a large period house. It is being sold to me with an EPC level of D.

Currently, this is fine and it comes with a three-year guarantee income from the local council (the tenant). However, what happens if the EPC requirement on HMOs changes to a minimal say of EPC level C during the rental contract with the council?

Also, two rooms are in the loft and there is no room to put extra insulation in if required. Am I sitting on a time bomb? The purchase price is good and the returns for a London borough are excellent- so it makes me think it’s all too good to be true!!

Thanks,

Jonathan


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Comments

Reluctant Landlord

9:49 AM, 14th June 2023, About 9 months ago

you might well find that as there is no clear cut answers, this is the reason why the current owner is selling....everything is still uncertain.

The big question over if it will be a C and when exactly are still not decided never mind answers that then follow.

Judith Wordsworth

10:03 AM, 14th June 2023, About 9 months ago

No one knows what is actually going to happen but If the legislation comes in and EPC required to be a C in 2028 and the property isn’t then you cannot rent it out.

There may be a cap on getting works carried out, talk is £ 10k instead of £3.5k having to be spent before applying and getting (?) an exemption.

How much work needs doing to get it to a C now, bearing in mind that the EPC grading criteria is changing at the end of this year so a C now might be a D in 2024.

Neil P

10:22 AM, 14th June 2023, About 9 months ago

Take a look at your EPC and see what improvements are possible...they'll also show a rough cost (though take them with a pinch of salt!). I've got a couple of properties with loft conversions...if I need to upgrade the insulation we'll remove the plasterboard in those rooms and fit solid insulation (celotex, kingspan etc) between (and perhaps under) the rafters. Then reboard, skim and decorate. It's a messy job, will mean no tenants can occupy the rooms for a while, but it should be great for your EPC rating and not hideously expensive. Do the work in a void - or move them to another vacant room for a week or two. You'd hope the Council would be happy to accommodate that as rooms become vacant.

If the other figures stack up so well, I'd not necessarily let it be a deal breaker. Only IMO of course.

The stupid thing about this EPC speculation is it's stopping me/others from doing some thermal upgrades now. In the past I've been happy to spend a few thousand to do right by the tenants (and the polar bears), with loft insulation, cavity wall insulation, new boilers etc but have stopped now as it won't count to any potential cost cap introduced in a few years (the £10k or whatever). I haven't got a limitless supply of money.

David Houghton

10:22 AM, 14th June 2023, About 9 months ago

As Judith says, no one knows. Present plans are 2028, but the next government may change things. I would just go ahead and not worry about it too much for now. There will always be exemptions and the won't really want you to evict to improve insulation

Reluctant Landlord

11:53 AM, 14th June 2023, About 9 months ago

Reply to the comment left by Neil P at 14/06/2023 - 10:22
if you explain the work to the tenants in situ and the (albeit temp disturbance), they can refuse. If they do , fine, get it in writing and then you can get an exemption for 5 years or until they move out giving you time to do in a void before reletting.

That's my plan in two properties where I have rooms in the same situation.

Reluctant Landlord

12:10 PM, 14th June 2023, About 9 months ago

Reply to the comment left by DSR at 14/06/2023 - 11:53
you may find tenants willingly sign to say they dont want the work if you explain that it will of course cost and that will mean ultimately the rent will have to be adjusted accordingly to pay for it....

I am more than happy to explain that an EPC increase to C is legally mandated by the government as they have determined this is the best way to cut CO2 emissions and reduce tenant energy bills.

If they feel this is unfair I will provide a link to their MP if they wish to discuss the matter further with them..

Darren Peters

15:44 PM, 14th June 2023, About 9 months ago

Reply to the comment left by DSR at 14/06/2023 - 11:53"if you explain the work to the tenants in situ and the (albeit temp disturbance), they can refuse."
Once there is no S21 I wonder what happens if they refuse to allow the work to be done and so you can't improve to the new EPC standard so you can't rent out and you can't evict.
Though perhaps you don't need the EPC to be higher for existing tenants.

Reluctant Landlord

16:25 PM, 14th June 2023, About 9 months ago

Reply to the comment left by Darren Peters at 14/06/2023 - 15:44
if they refuse to allow work to be carried out then you can apply for exemption for 5 years or until they move out so the work can be done then.

If on the flip side you wanted possession on the basis you want to comply with the EPC regulations, but access is denied to do so then you may be able to use the ground that work cant be done with them in situ and as they have not allowed access you seek possession (in the interim apply for exemption so you dont get stuffed in court while going for possession for then letting a property illegally as not reached the required EPC standard)

Double edged sword and depends if you ultimately want possession or not. In my circumstance my tenants would have no where to go (are not that bad really) AND would not want a rent increase to pay for works (ironically) to save them energy costs. They would happily say no to works on this basis.

Even if they did move out, (will there be anything left in the PRS at this stage??) other landlords would be upping their rents as they too would also probably have to/already have carried out EPC works...

GLee

19:44 PM, 14th June 2023, About 9 months ago

It's a Catch-22 situation for which there is no clear answer. You'll be breaking the law if you rent a D. So, you will have to evict, but with abolition of s21, you will have to rely on s8, but EPC is not a valid ground for s8. So, you will get a Rent Repayment Order against you, i.e a lose-lose situation. No doubt the tenants will have the Council and Shelter on their side against you all the way to the Courts and the Bank.

Rebecca RAHMAN

22:14 PM, 14th June 2023, About 9 months ago

It's for new tenancie so as long as they're there you can continue to rent to them.

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