The vital role of brokers in EPC education of landlords – Ward

From 2025, properties will need to have at least a C rating on their energy performance certificate (EPC) for new tenancies, with this being extended to all existing tenancies from 2028. 

It’s not just the requirements themselves that present an issue though, but understanding them too, since our recent research makes clear that there is work to be done among brokers on understanding what those requirements are. 

We found that just 13 per cent of advisers feel very confident about what is being proposed by the government around the minimum levels of energy efficiency necessary before a property can be let out. By contrast, almost half said they were not entirely confident about what is expected. 

While it is understandable that this has not necessarily been a priority up to now, the reality is that the clock is ticking. There is more to this than simply the deadline itself, but also the fact that if landlords are to carry out the sorts of home improvements necessary in order to meet those higher thresholds, this won’t be an overnight process.  

Instead, those landlords will need to raise the funds, book in the tradesmen to carry out the work and ensure that the property is compliant in advance of that initial deadline.  

Brokers can act as educators 

Given this, it’s particularly notable that landlords themselves also seem somewhat in the dark around the new expectations. Our study found that half of brokers have not been asked about the new EPC rules by any of their investor clients. A paltry four per cent have been asked about the rules by all of their investor clients. 

This opens the door for intermediaries to effectively act as educators for their landlord clients. Landlords are going to have to get to grips with the expectations if they are to avoid enforcement action; if brokers can help them understand those rules, and arrange any financing necessary for carrying out the improvement work, then that simply cements the relationship. 

Brokers are trusted partners of investors for a good reason, and by helping them get to grips with the changing rules, advisers can boost the chances of that relationship lasting for the long term. 

This need not entirely be a burden for brokers either. Lenders can be proactive in supporting brokers in that education role; at Mercantile, for example, we have produced an EPC guide which brokers can share with their clients.  

The guide, which has been produced with Elmhurst Energy, is designed to help those landlords to build a plan of action, to work out not only what work is needed to hit that minimum C rating but also what the costs are likely to be. 

The funding options 

To date, there has been little action taken by landlords in raising the efficiency levels of their portfolio properties. Our study found that more than 60 per cent of brokers have not arranged a single bridging loan for a client in order to finance home improvements aimed at energy efficiency. 

What’s more encouraging is that advisers are well aware that this will be changing before long, with 66 per cent expecting to do more business in this area over the next year. As we get closer to the implementation of those new rules, interest in efficiency-focused improvements will have to grow, opening the door for brokers to highlight the various options open to those clients. 

Lenders must do more 

It’s crucial for everyone in the mortgage industry to understand that these changing rules present an opportunity, to better connect and support the landlord community. 

But there is evidently an expectation that lenders in particular have more to do. Our research found that two-thirds (69 per cent) of intermediaries want to see lenders be more innovative in their product design and develop specific products for landlords looking to raise the efficiency standards of their portfolio. 

Actions will speak louder than words here.

If lenders are serious about supporting efficiency improvements, then they will need to offer products that truly meet the needs of investors. At Mercantile we have worked with a host of landlords already moving to raise efficiency standards; brokers will need to identify the lenders who are truly keen to be active in this area, and who deliver the right sort of funding to make a difference.