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  • Refurbish/Develop

    Making a poorly-rated EPC property lettable

    Hello Property Tribes Community,

    I've spotted a property in my local area which has been on the market since August '18, listed for £55k, and is currently of vacant possession (I believe the former owner has recently deceased). The property requires a cosmetic refurb, with complete modernisation (including kitchen, flooring, repainting etc.) though nothing 'too' heavy.

    Sold comparables in the area are more like £75-£80k, so it looks as though there's money in the deal, and it looks to be a great opportunity (has the right fundamentals, location, schools etc. etc.).

    However......... the property has an EPC rating of G, with the 'potential' to improve to an E, albeit at pretty significant costs:
    - Cavity wall insulation (£500 - £1500) 
    - Increase hot water cylinder insulation (£15-£30)
    - Floor insulation - solid floor (£4,000-£6,000)
    - Change room heaters to condensing boiler (£3,000-£7,000)
    - Solar water heating (£4,000-£6,000)
    - Solar panels (£5,000-£8,000).

    With the regulations coming in from April 2018, all properties let must be grade E above, though I've done a bit of research and stumbled upon the '£3,500 exemption' landlords can register for.

    "Residential landlords of properties with an EPC rating below E would be required to consider all energy efficiency improvement measures, recommended in an EPC report or other energy efficiency advice report obtained for their property, and implement any recommended measures up to the value of £3,500. If, following the energy efficiency works, the EPC rating of a property was still below E, residential landlords would be able to register an exemption.

    Residential landlords seeking to register this exemption would need to provide:

    evidence that £3,500 worth of recommended energy efficiency measures have already been implemented; and
    three installer quotes showing that further energy efficiency measures, to bring a property up to an EPC E rating, would exceed £3,500."

    To my understanding, landlords are expected to complete the works costing UNDER £3,500; anything exceeding this is not expected, and therefore the exemption can be applied and the property then let out.

    In this example therefore, you'd have the cavity wall insulation done (it's a mid terrace, so more like £500) plus the hot water cylinder insulation (relatively minimal cost), and that'd be pretty much it. I'd obviously also look at the state of the existing boiler, as I can't imagine it to be great.

    Am I understanding the situation correctly?

    Thanks for your time.
    Conor

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    Why not fix the problem for your future tenant and increase value of the house by installing a new combo boiler. Some rock wool in the loft. Potential some insulation plaster boards and you will be close to a C rating.  That will be below £3k

    The cost in the report is not a true reflection of how much it will cost, well maybe if you pick the most expensive quote?

    By the way the EPC reports are poor and not a true reflection of how energy efficient the property is. It is a tick box excise (double glassing tick, loft insulation tick etc etc)

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    At the present time you need do nothing, the current legislation is predicated on the availability of a Green Deal loan, with the ending of green deal there is no legal route to prosecute for a technically substandard epc. It will be part of the new habitation standard going through parliament but the issue of how much a landlord has to spend and what will be tax deductible is ( as far as i understand) not decided.

    My local council was expecting to be able to deal with quite a lot of substandard property on the epc ratings, now all it can do is tackle them under excess cold in hhsrs, but then all a landlord has to do is put in cheap electric convector heaters, all this does is give tenants a home they may potentially be able to heat if they can afford the bills.

    of course government will never own upto such a c”+*kup

    eventually you’ll have to do something, the easiest way to comply , will be gas central heating, cheap double glazing ( if not already in place) plenty of insulation in loft, led lighting everywhere, do away with the hot water tank, this in all but the worst buildings should get you a D rating.

    If you can’t manage a D for reasonable money, i’d walk away, unless you intend moving the property on within 5 years.

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    Hi Conor,

    This is a very good strategy to pursue!

    Have a look at this thread:

    EPC improvement strategy - Brightstar

    There is even a financial product that will assist you in achieving this. Smile

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    That's fantastic - thanks Vanessa.

    Looking at the product, it assumes upon 'bridge exit' that the property is mortgageable as a BTL - I assume you'd have to have the EPC exemption applied for prior to this? Unsure on timescales etc.

    Also, the minimum amount lent of £50k at 75% on the initial purchase would mean the purchase price would be nearer £67k (I'd hope to get the property for nearer £50k!).

    I'll be sure to watch the videos on the thread. Really appreciate your input.

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