Buy-to-let property investors could face a bill of £420 million between them to meet new energy standards, according to new research by the UK Green Building Council. With around 300,000 rental properties expected to be below the new standards, that works out at an average cost of £1,400 per property for works to bring it up to the minimum standard. Landlords with large portfolios could be looking at a very expensive bill.

As from April 1 this year, properties need to have a minimum rating of E on the Energy Performance Certificate. The regulations are being introduced in two stages. From this year, the regulations affect all new lets and tenancy renewals. All other existing tenancies will need to comply from April 1, 2020. Landlords can apply for their properties to be exempt if it would be too costly or almost impossible to meet the E rating. However, most properties with an existing F or G rating cannot be rented out without energy efficiency improvements being carried out.

With fines of up to £4,000 for breaching the new regulations, landlords with multiple properties are advised to act now to raise the finance for the energy improvements. Specialist lender Together’s commercial chief executive, Marc Goldberg, said landlords are facing increased squeezes on their cash flow and cannot afford to be hit by these fines. New taxes and other regulatory changes have also been introduced which affect the buy-to-let sector and this is yet another one.

It is true that making a property more energy efficient means it will be more attractive to tenants and will boost rental yields long-term. However, the question is whether landlords have the finances or can raise the money immediately to fund this additional expense. The average UK landlord has about eight properties in a buy-to-let portfolio, so these costs could be considerable.

Certainly, tenants can save on their energy bills. Government figures show the average energy bill for a property with a rating of G is £2,860 a year, while it is £1,710 a year for band E properties – an annual saving of £1,150. A report for the UK Green Building Council shows the average cost of the works required to get an E rating is about £1,400, while a D rating would cost a further £1,300. It is certainly worth the investment so that properties are not made redundant because they do not meet the new energy-efficient standards. Also, tenants will be happier with warmer, more efficient homes and much lower bills.

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