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Making a poorly-rated EPC property lettable (including available landlord exemptions) - potential opportunity.


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Hello PropertyHub 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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