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EPCs for holiday lets; what's the point?

Interestingly quite a lot, but it is important to consider the provision of the EPC with its potential benefits separately from the issue of presentation of the EPC to the client.

A limitation for EPCs in the sale process is that they are usually produced for a seller who is leaving the property and therefore has little interest in investing further in it. The buyer will have other priorities when settling in and the EPC recommendations will be less important than arranging the furniture and creating the feel of a new home. It remains a challenge to increase the focus on the EPC at the point of sale.

For rental properties the situation is different but arguably little better. The EPC is usually produced for a Landlord who is retaining the property and could have an interest in making further investment in it. The energy efficiency improvements identified however will usually have a cost to the Landlord but the saving from the reduced energy consumption goes in the pocket of the Tenant. The landlord is in business to make a profit and a cost which delivers a payback for someone else is not an appealing investment. (The main exception is where there is a community heating system with flat rate charging and the Landlord bears the energy cost and can increase profits through reducing it).

The solution which has been slow to materialise is for the Landlord to be able to generate a higher rental from a property that costs the tenant less to live in. That is what the EPC is really about and it is a proven argument. The sellers of white goods can sell "A" rated products for more than lesser rated ones because the consumer knows they will save the difference and more. This fact has also forced manufacturers to improve their products to achieve the ratings that people will pay for. Exactly the same will happen in the property market once letting and estate agents realise that they can increase prices and rents for energy efficient properties (and earn more commission) if they market the benefits effectively.

So, what has this got to do with holiday rentals?

Largely in this market sector the energy is included in the rental cost. This places the cost of improvements and the benefit from them on the side of the property owner. Investment in energy efficiency by the Landlord can increase the profits for the Landlord and makes it a much more attractive proposition. This means that potentially the EPCs produced for holiday homes should be the ones most likely to result in recommendations being carried out.

Clearly then it is important to produce EPCs for holiday homes and the clarification of this requirement is a positive step in the drive to improve the energy efficiency of buildings.

The other part of the argument however is around the practical aspects of providing a copy of the EPC to the holidaymaker. There is a massive difference between the logistics of providing an EPC to a  prospective buyer or tenant looking at a one off high value transaction to buy or lease a property, and providing an EPC to many prospective holiday makers, looking at a multitude of possible places to rent for a few days. For the reason illustrated above you also have the situation where, other than the possibility of wanting to make an environmental statement, the rating has limited relevance to the holidaymaker; the value in this case being to the owner.

The application of EPCs to holiday properties needs to be done, but it also needs to be practical. It is essential that government recognise the differences in who the EPC is relevant to, and the market it is presented in, to ensure that EPCs are a benefit, not a burden.

A potential solution is simply to require the marketing of holiday properties to include a thumbnail of the efficiency band, in much the same way as they have a thumbnail symbol for how many beds there are and whether they take pets etc. That is enough for the "green" holidaymaker to filter their selection. The EPC should then be available on request and in the property, either displayed on the wall or included in the property information folder.

This solution ensures the owner has the benefit of EPC advice and buildings with potential to be improved are identified. It also gives the holidaymaker access to as much of the rating information as they want to see and the ability to make informed choices without a significant cost to holiday marketing. The only barrier is that it needs the legislation to acknowledge and cater for the fact that this sector is slightly different and a one-size-fits-all solution is not practical.

23 July 2011

Ian Sturt DipHI, DipNDEA(L4), Dip DEC

HI Devon Energy Assessment

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