Investors will have to drag the EPC of all new rental properties up to a C or higher by December 31 2025 for new tenancies and the same date in 2028 for existing tenancies. Shawbrook research of over 1,000 landlords suggested many are already cash poor with 19 per cent funding refurbishments with credit cards or short-term finance products and 60 per cent harnessing assets like personal savings or investments.
Group editor of Mortgage Solutions Victoria Hartley (VH) speaks to MD of TBMC Jane Simpson to get a grip on the work brokers can do to raise client awareness, offer thought-leadership on this and create real refinancing opportunities for their businesses.
Jane Simpson (JS): The opportunity is there to really help landlords. Whether with large or small portfolios, they’ll need a lot of work doing and will need some help to get there. So from the brokers perspective, there is an absolute real opportunity there to contact the landlord customers to discuss the problem with them and make sure they’re really fully aware of it in the first instance. Show your knowledge in the space and look at the properties, which need work and then how to release funds to get that work done. In terms of tools, look at the EPC checker on the government website.
Have a look and see what the current EPC rating for each property is if it has been done in the last 10 years of course, and then if you click further through into that, it will actually give you the recommended updates to bring it up to a grade C alongside the estimated costs as well. If a landlord hasn’t had one done in the last 10 years, which for a landlord is probably quite unlikely because you would think they probably would have purchased or remortgaged or done some transactions, but if they didn’t have one, you can look at properties in the street to understand where the property might sit. Use the tool to add up all the work that needs doing and see what the typical capital spend might need to be. If too much, they might decide actually, they’re going to offload that particular property and use some of that money to upgrade the others.
But you’ve also got things like second charges, bridges, remortgaging. It’s a question of looking across the portfolio and looking at what needs to be remortgaged in the next couple of years, how much can we release there? You can take a look at total cost and where the funds will come from – and that’s just a brilliant starting point. And then over the next three years, the broker can work with them to actually get those transactions through.
VH: Where can landlords get the information they need to make sure they are making the most cost-effective energy-saving improvements possible to get the optimum return on investment?
JS: There are EPC firms listed on the government website able to handhold landlords through the whole process. So for the price of your EPC you actually get to contact them throughout the process and say I’ve done this now, so where am I? The cost is roughly £60 and great value for money.
VH: Is this likely to become a tick box exercise to hit the right EPC grade C and above, or will landlords reap wider benefits from investing to get utility bills down?
JS: If I am a tenant and I’m looking at two potential properties and the A-certificated property could save me thousands a year in gas and electricity, that will come into play as we get further down the line. There seems to be, I think, scope for it being added value to the landlord once they’ve put the money in. Right now, it’s going to feel like a tick box exercise, and like another hurdle that’s been thrown at them. But I do think eventually tenants will use EPCs to get better rental properties
VH: How can brokers stay on top of the incoming changes, given that things could still change and nothing is law yet?
JS: The government’s bill has had its first reading but I think we just need to keep an eye on that. There might be changes to the date. I wouldn’t be surprised if things get pushed back a little bit. Also, look at any local councils to see what they’re offering to help landlords and assess any local grants and schemes that could save the property owner money and offer guidance.
VH: What could this do for broker firms from a marketing perspective?
JS: Don’t wait for the remortgage to come around or new purchase. Stay in contact and if you know what your customer wants, then you can arrange to call or help them to make that transaction and then it becomes a bit more of a business relationship. You’ll become their ‘go to’ over the course of a year. At the Specialist Lending Event (TSLE), one of the broker delegates was tweeting all his landlords to let them know about the upcoming changes. Brokers need to help educate landlords because, quite simply, you will both look like you are and be on top of your game.
