BTL LANDLORDS Energy Performance Certificate rating.
Successive governments have one thing in common: they all seem incapable of leaving the buy-to-let sector along for any consistent length of time. Of course, the most guilty party in recent history, former Chancellor George Osborne, repeatedly tinkered with the private rental sector, making it less profitable and more time-consuming for landlords to operate in.
The current challenge facing landlords from government regulation is over energy efficiency. This focus is more understandable as climate change and the subsequent move towards ‘net zero’ require action and change from all parts of society. It doesn’t mean that it comes without significant cost, though.
Since April 2018, any rental properties with an Energy Performance Certificate (EPC) rating of F or G have been deemed to be below expected environmental standards, with the landlord required to get the property to level E or higher before the tenancy was renewed or a new tenant introduced.
But there was more. April 2020 saw these regulations apply to all tenancies: pre-existing ones were included as well as new ones, and cover all assured tenancy, regulated tenancy and domestic agricultural tenancy agreements.
Of course, it didn’t end there. We now face a serious deadline in 2025. By then, every buy-to-let property with a new tenancy will have to have an EPC rating of C (existing tenancies will have until 2028). This means an awful lot of work will need to be done before then if a landlord wants to be able to legally let out a property with a new tenancy agreement in place.
The reality is that this transition is going to cost landlords a lot of money; indeed, estimates for the cost of bringing all housing in the UK (not just rental properties) up to a minimum EPC rating of C total £304 billion!
Brokers should be contacting their landlord clients now and seeing if they can help with raising the funds needed to get properties up to the required standard. Of course, many buy-to-let investors will likely have secured low fixed rates and will be loathe to remortgage. That’s where a second charge buy-to-let loan can be the ideal solution. It can be used by the landlord to borrow money using the equity in their buy-to-let property or portfolio of properties. They can then make the required energy efficiency improvements to their existing properties and remortgage when they’re ready, using the improved value of the property to secure a low rate.
We offer buy-to-let second charges at Mercantile Trust and have helped a number of brokers successfully secure finance for their landlord clients to get their properties up to the required standard. We allow buy-to-let investors to borrow from £10,000 to £500,000, with repayment terms from three to 25 years. The process takes the same length of time as a residential second charge so borrowers can rest assured that they will receive their funds in a short space of time.
With less than three years to go until the EPC C deadline, It’s time to focus your energies on getting in touch with the buy-to-let investors on your books and helping them finance the environmental improvements they need in the current regulatory climate.
