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Landlord despair: ‘I spent £40k making my flat more energy efficient but my EPC was downgraded’

Landlord despair: ‘I spent £40k making my flat more energy efficient but my EPC was downgraded’
Samantha Partington
Written By:
Samantha Partington
Posted:
23/10/2023
Updated:
23/10/2023

A flat owner in Bristol spent more than £40,000 making his home more energy efficient but was shocked to discover his Energy Performance Certificate (EPC) was downgraded from a compliant ‘C’ to a ‘D’ grading, thwarting hopes of renting out the property under the now scrapped deadline.

In the first of YourMoney.com’s special series on EPCs, we look at how they work, how your property is assessed and how one homeowner spent thousands of pounds in a bid to improve energy-efficiency with a new electric heating system, but later found out it would have been ‘greener’ to go with gas.

After buying the dated four-bedroom flat for £400,000 in 2021, Edward planned to renovate the property and rent it out to support his retirement income before moving in himself a few years down the line.

His builders installed thermal and sound insulation between each internal wall and they replaced his single electric night storage heater with a new electric boiler and water heating system which was set up to run mostly overnight on a low-rate energy tariff.

When he bought the flat, the EPC was rated a ‘C’, meaning it was compliant under previous legislation coming into effect in 2025 for new tenancies which required rental properties to be graded an ‘A’, ‘B’, or ‘C’ – the most efficient ratings.

EPC downgraded from ‘C’ to ‘D’

After his home improvements, he jumped at the chance to get a free EPC offered by his mortgage provider and expected to see his rating enhanced. Certificates are valid for 10 years and Edward’s had expired last year so he would also have peace of mind to let out his flat in the years to come.

However, the grandfather of four was alarmed to discover his £40,000+ home and energy ‘improvements’ resulted in his EPC being downgraded from the minimum ‘C’ standard to a ‘D’, which could have derailed his plan to rent out the flat in the future.

“When I got my new EPC report and saw my rating had worsened, I was shell shocked,” said Edward.

“The money I had spent improving the efficiency of my home actually had the opposite effect. I thought electricity was the way forward but the system had a particular dislike of electric central heating.”

Edward challenged his assessor over the outcome, anxious about the impact the sub-standard rating could have on his rental plan in the future.

“Everything I did in the flat was done in a way to maximise efficiency,” he said. “I thought I was putting in a much more efficient low-cost system by running it off-peak. But what the report is saying is that one 15-year-old storage heater, probably with a bit of asbestos in it, was rated average and my new system is rated really poor. I challenged the report on all points but it was a ‘computer says no’ situation.”

However, the Government last month scrapped the minimum ‘C’ EPC rules, bringing some relief to the retired financial services worker, but confusion over how EPCs work and what determines their ratings.

Computer says ‘no’ to an electric boiler: How EPCs actually work

If swapping an old electric heater with a brand-new electric heating system costing thousands of pounds leaves you with a worse rating than you had before, how exactly do EPC ratings work?

Since 2008, it’s been a legal requirement for anyone selling or letting out a home to have a valid EPC. Each certificate displays a rating from A – the most efficient – to G – the least, plus a set of recommendations to improve your score.

The ratings and recommendations aren’t based on a surveyor’s professional opinion of your specific property, how you use it, its age or nuances. Nor are they based on your carbon footprint and impact on the environment.

Your EPC report is generated by a computer based on the answers to a set of questions that are uniformly applied to every property.

An EPC rating is based on how much it costs to run your home, not energy consumption so it considers how much energy a property uses per square metre and how much energy it loses. This is then translated into cost, which is calculated based on a standard set of fuel prices listed in the EPC’s methodology.

First, a score is generated based on a standard visual assessment of your home, the results of which are fed into the computer programme. In the case of wall insulation, which cannot be seen, homeowners must be able to provide evidence of the installation for it to be considered.

The assessor’s considerations include how energy-efficient the heating system is, how well the property is insulated, what energy source is used (e.g. electric, gas, oil), what type of shower system is in place, and whether the property has any renewable energy technologies installed like solar panels or heat pumps.

Your score determines the EPC rating. The higher it is, the better your rating.

‘EPCs are easily misunderstood’

Stuart Fairlie, managing director of accreditation body, Elmhurst Energy, responsible for overseeing the company that produced Edward’s EPC report said: “EPCs are not misleading, but they are easily misunderstood. You must keep in mind that EPCs for homes were first introduced over 15 years ago, purely as a cost measure, which meant that the A to G rating simply indicated how cheap or expensive a home would be to run.

“Today, however, our concerns and interest in energy are much more about reducing energy use and carbon emissions.”

Indeed, the Government previously placed huge emphasis on EPCs, dictating whether landlords would be able to let out their properties based on whether this one letter rating would meet or fail the minimum standards. This legislation has been scrapped.

Fairlie added that storage heaters are much cheaper to run, which scores highly on the assessment.

“Storage heaters are designed to work with a dual-rate electricity tariff, they use the cheaper low rate through the night to store up heat.

“Electric boilers aren’t designed to work in the same way. They cannot make good use of the low rate therefore they are assumed to be more expensive to run which automatically means a lower rating.”

He added that Edward’s original EPC recommended that the property would benefit from fan-assisted storage heaters, as these are specifically designed to use a lower-rate of electricity. If these had been installed instead of an electric boiler, the energy rating would have increased to band ‘B’ assuming the other improvements recommended had also been installed.

Under the current EPC methodology, using a fuel, like electricity, which is high in price in terms of pence per kilowatt hour means that a standard electric heating system will automatically be scored lower than a gas alternative because gas is cheaper.

Choosing an energy efficient tariff for your heating, as Edward did, does not improve your score.

“An EPC is not based on an occupant’s use or behaviour,” Fairlie said. “Should Edward move out, another family may not choose the same tariff.

“It is vital to understand that an energy assessment and the EPC are based on a standard occupancy model, for example a family living in the property operating the home on set temperatures and standard running times,” he said.

“The EPC predicts the heating, hot water and lighting for the home based on average use patterns and average weather conditions.

“The energy assessor will have identified the heating system in the flat, and the software will have automatically assumed a standard heating pattern and a standard set of fuel prices. Electric boilers are not designed to utilise the lower rating so the heating system will be scored lower in the breakdown of the property’s energy performance.”

‘Originally designed to reduce fuel poverty’

Andrew Parkin, managing director of EPC accreditation body, Stroma Certification, said: “If you go from a fuel that’s cheaper to a fuel that’s more expensive, your EPC will be impacted in a negative way.

“The question to ask is why, when the Government wants us all to move onto electricity because it’s becoming cleaner and greener with every day that goes by. It all comes down to what the EPC was originally designed for, to reduce fuel poverty.”

Although EPCs indicate how much carbon a home produces it is not factored into the assessment. It’s a frustrating point for Edward whose carbon production has reduced from one EPC report to the next.

Elmhurst said the Government is aware that changes to the EPC system are needed, given how they are used to encourage homeowners to become greener.

Fairlie added: “The good news for homeowners is that the Government recognises change is needed. It has produced an EPC action plan and is seeking to change the law to allow improvements to be made.”