HIPS For Landlords

Energy Performance Certificates (EPC) for rental properties

The full roll out of Home Information Packs (HIP) does not affect the rental property market, but the involvement of Energy Performance Certificates (EPC) certainly applies. From October 1, 2008, privately renting tenants in England and Wales will receive an EPC from their landlords - which is a requirement of the EU's Energy Performance of Buildings Directive (EPBD).

According to the Government, buildings are responsible for almost 50 per cent of all energy consumed in the UK and over a quarter of CO2 emissions, while forecasts suggest a large proportion of current buildings will still be in use in 2050.

Property that is owned by a landlord and is part of their rental property portfolio will be subject to energy assessment to establish the performance of the building in a similar way to residential domestic property. The survey of the property will be undertaken by a Domestic Energy Assessor (DEA) and owners can voluntarily provide a certificate up to the proposed deadline - after this time an energy certificate will be mandatory.

Dwellings will usually be assessed using the Reduced Data Standard Assessment Procedure, where inspectors collect standard information on the type of property and construction, the property dimensions including room sizes, types of windows, room and water heating systems and controls, plus other details such as wall, loft and water tank insulation. An energy rating is then confirmed. For a landlord, the positives appear to be that an energy rating can help rent out the property. It indicates to a prospective buyer or tenant how energy efficient the home is and it should also provide information that may help to reduce the running cost of the property. It has also been noted that EPCs bridge the 'landlord-tenant divide' - as currently tenants are responsible for paying the energy bills while landlords put up the capital for the building and services plant. This means the landlord has no incentive to pay for energy efficiency improvements, while the tenant - who does have the incentive - is not realistically in a position to make them.

Therefore, landlords will be encouraged to pay for energy improvements and provide tenants with information enabling them to choose buildings with low energy costs - ultimately adding value to high performance buildings, and offering an incentive for landlords to provide them. Also, the Government argues that in the case of rental properties, high rating will be more desirable and will impact on the marketability of properties - and hence ultimately on rent levels.