Lender urges landlords to use bridging to meet commercial EPC legislation

From 1 April, landlords will not be able to let out commercial properties with an EPC rating of F or G to new or existing tenants.

This builds on the implementation of Minimum Energy Efficiency Standards (MEES) in 2018, which said it was unlawful for landlords to grant new leases on commercial properties if the EPC rating was less than E.

The firm said that some lenders would not consider lending on properties with an EPC rating of E or lower, so a short-term bridging loan would allow investors to buy a property and carry out necessary work and then switch to a longer-term buy-to-let mortgage when the works are done.

Interest in bridging expected to grow

Richard Keen (pictured), Greenfield Mortgages’ national account manager, said that he expected interest in bridging finance to increase after April.

He noted that if landlords did let out F or G-rated properties past this date, they could face fines of £5,000 or more for non-compliance and would seek “alternative methods of finance”.

Keen said: “Landlords in these situations can often find themselves facing a chicken-and-egg situation – they need funds to bring a property up to the minimum standards, but they can’t get the funds until the standards are met.

“By taking out a bridging loan, landlords can carry out improvement work, such as installing double glazing, upgrading an out-of-date boiler or fitting loft and wall insulation, before exiting onto a term product once the work is completed and the property complies with energy efficiency standards.”

Keen continued that with the government saying its “preferred policy” was for rental properties to have an EPC rating of C or higher for new tenants by 2025 and for all tenancies from 2028, this trend would grow.

The Minimum Energy Performance of Buildings Bill is due to have its second reading on 24 March. There are a further 10 stages after the second reading to go before it is given royal assent and becomes law.

Keen said that the advantages of bridging were that it “can be arranged quickly and the process is much easier compared with other more traditional ways of borrowing”.

“At Greenfield Mortgages, we provide clients with a credit-backed decision within two hours, and we complete on the majority of cases within 10-14 days, with some deals completing in as little as five days,” he added.