Adrian Moloney

Could EPC regulation changes lead to increased demand for bridging?

Changes to Energy Performance Certificate (EPC) regulations, which came into force on 1st April, will mean it is unlawful for a residential or commercial landlord to grant a new lease on a property with an EPC rating of F or G.

Properties which do not meet the minimum standards may require renovation before they are let out to new tenants or extend current tenancies. These necessary improvements to properties will often have to be made within a set time period and those that fail to comply could face fines as a result.  

These new regulations could well present opportunities for bridging finance providers. This is especially true when it comes to commercial properties. It’s estimated that 15% of commercial properties in the UK have an EPC rating of F or G. Now that the new regulations are in force, landlords will need to make the necessary changes in order to ensure tenant voids are kept to a minimum.

Bridging finance could well play a vital role in helping landlords make these changes as quickly as possible. Unlike mainstream lenders, bridging finance providers can be much more flexible and, therefore, provide the funds needed quickly – enabling landlords to make changes swiftly. Unlike residential landlords – where changes to properties are unlikely to cost a high amount – commercial landlords could be facing a substantial cost in order to attain a rating of E or higher. If they don’t, the cost of non-compliance is likely to be higher as well. For those that don’t have the capital available, a bridging loan could be a smart solution.

For some portfolio commercial property landlords, the new EPC regulations also present an opportunity to purchase additional properties at potentially lower values. Indeed, there may be some landlords that, finding themselves unable to or unwilling to make the changes, decide to sell off properties with lower ratings. Landlords looking to buy additional properties could capitalise on such opportunities by taking out a bridging loan to be in the position to purchase as soon as the property enters the market and make subsequent renovations quickly.

The new EPC regulations present an opportunity – not just to implement more environmentally friendly products and systems into buildings – but also for both residential and commercial landlords looking to increase their portfolios or secure better tenants. As the buy-to-let market professionalises, portfolio landlords are taking a larger share of the market. With more full-time professionals in the market, this is likely to mean more time and money spent on renovations to ensure high quality. However, to fully take advantage of what the changes could offer landlords and their brokers, they must not only be aware of the changes to EPC regulations; they’ll also need to be aware of alternative routes of funding to help improve their property.

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