EPC Cost Cap Exemptions: Landlord Guide

What is the EPC Cost Cap?

The Minimum Energy Efficiency Standards (MEES) include a cost cap that limits how much landlords must spend to achieve compliance. Currently set at £10,000, this cap applies to reaching EPC E (since 2018) and will continue for the EPC C requirement from 2030.

How the Cost Cap Works

• Maximum spend: £10,000 per property (including VAT)
• Qualifying improvements: Only energy efficiency measures count
• Evidence required: Minimum 3 quotes from qualified installers
• Exemption duration: 5 years from registration

Types of EPC Exemptions

1. High Cost Exemption

When all relevant energy efficiency improvements would cost more than £10,000.

Requirements:

• Obtain quotes for all recommended EPC improvements
• Demonstrate lowest cost exceeds £10,000
• Quotes must be from qualified, insured installers
• Cannot cherry-pick cheaper improvements and ignore others

What Counts Toward the £10,000:

• Materials and installation costs
• VAT on energy efficiency improvements
• Scaffolding specifically for the improvement work
• Professional fees for energy assessment
• Building control fees for improvement work

What Doesn't Count:

• General maintenance and repairs
• Decorative improvements
• Planning application fees
• Legal costs
• Temporary accommodation costs

2. Technical Exemption

When energy efficiency improvements are technically impossible or would cause significant problems.

Examples of Technical Exemptions:

• Cavity walls already filled: No further cavity insulation possible
• No cavity walls: Solid walls where external/internal insulation impossible
• Structural constraints: Building cannot support additional weight
• Space constraints: Insufficient space for equipment
• Listed building constraints: Improvements would alter historic character

Evidence Required:

• Report from qualified energy assessor or surveyor
• Technical explanation of why improvement is impossible
• Photos or surveys demonstrating constraints
• Structural engineer report (if relevant)

3. Third Party Consent Exemption

When required consent for improvements is refused by a third party.

Common Third Party Consent Scenarios:

• Freeholder refusal: Leasehold properties where freeholder won't consent
• Planning permission denied: Local authority refuses improvement application
• Listed building consent refused: Historic building protections prevent work
• Superior landlord refusal: Head lease prohibits alterations
• Mortgage lender objection: Lender refuses consent for alterations

Requirements:

• Formal application for consent must have been made
• Refusal must be documented in writing
• Consent request must have been reasonable
• Cannot apply if you haven't actually sought consent

4. Property Type Exemption

Certain property types may be exempt from some requirements.

Exempt Property Types:

• Listed buildings: Where improvements would alter character
• Buildings in conservation areas: Where consent refused
• Temporary buildings: Not intended for permanent occupation
• Holiday lets: Not primary residence (disputed area)
• Religious buildings: Used primarily for worship

Exemption Application Process

Step 1: Gather Evidence

Different exemption types require different documentation:

For High Cost Exemptions:

1. Current EPC showing rating below required standard
2. Detailed improvement recommendations report
3. Minimum 3 quotes from different qualified installers
4. Quotes must be dated within 12 months of application
5. Evidence that all quotes exceed £10,000

For Technical Exemptions:

1. Professional technical report explaining impossibility
2. Photos or surveys showing constraints
3. Structural or building survey (if relevant)
4. Energy assessor confirmation of technical constraints

For Consent Exemptions:

1. Copy of consent application submitted
2. Written refusal from consent-giving body
3. Evidence consent was reasonably necessary
4. Correspondence showing refusal reasons

Step 2: Register Exemption

• Online registration: Via government PRS Exemptions Register
• Required information: Property details, exemption type, evidence
• Supporting documents: Upload all evidence files
• Declaration: Confirm accuracy of information provided

Step 3: Exemption Validity

• Duration: 5 years from registration date
• Property changes: Must re-apply if circumstances change
• Renewal: Can apply for new exemption before expiry
• Record keeping: Maintain all evidence for inspection

Exemption Scenarios and Examples

Example 1: High Cost Exemption

Property: 1920s solid wall terrace, EPC F

Required improvements:

• External wall insulation: £8,500
• New boiler: £3,200
• Loft insulation: £400
• Total cost: £12,100

Result: Qualifies for high cost exemption as total exceeds £10,000

Example 2: Technical Exemption

Property: Victorian terrace, no rear access

Issue: External wall insulation impossible due to:

• No access for scaffolding at rear
• Internal insulation would reduce room sizes below building regs
• Party wall agreements impossible to obtain

Result: Technical exemption granted based on insurmountable constraints

Example 3: Consent Exemption

Property: Leasehold flat in converted Victorian house

Issue:

• Freeholder refuses consent for external works
• Lease prohibits alterations to building exterior
• Internal improvements insufficient to reach EPC E

Result: Third party consent exemption due to freeholder refusal

Partial Exemptions and Compliance

Spend Up to the Cap

Even with an exemption, landlords should implement improvements up to the £10,000 limit:

• Requirement: Spend available budget on most cost-effective improvements
• Evidence: Show which improvements were implemented
• Remaining gap: Document why target rating still not achieved

Example: Partial Improvement

Property: EPC F, needs £15,000 to reach EPC E

Action required:

1. Implement £10,000 worth of most effective improvements
2. Achieve best possible rating (maybe EPC F+)
3. Register exemption for remaining gap
4. Property legally compliant despite still being F-rated

Exemption Monitoring and Compliance

Local Authority Enforcement

• Compliance checks: May request exemption evidence
• Tenant complaints: Can trigger investigations
• Regular reviews: Some authorities proactively check exemptions
• Penalties: Invalid exemptions result in standard MEES penalties

Record Keeping Requirements

• Exemption certificate: Keep copy of registered exemption
• Supporting evidence: All quotes, surveys, correspondence
• Duration: Records must be kept for exemption validity period
• Tenant provision: Must provide exemption details to tenants

Common Exemption Mistakes

High Cost Exemption Errors

• Insufficient quotes: Need minimum 3 from different companies
• Cherry-picking improvements: Must quote for all recommended measures
• Including non-qualifying costs: General maintenance doesn't count
• Out-of-date quotes: Must be within 12 months

Technical Exemption Errors

• Inadequate evidence: Need professional confirmation of constraints
• Assumption rather than investigation: Must properly assess feasibility
• Ignoring alternatives: Consider different improvement approaches

Process Errors

• Not registering exemption: Invalid unless properly registered
• Incomplete applications: Missing evidence makes exemption invalid
• Assuming permanent exemption: All exemptions have 5-year limit

Exemption Strategy and Planning

When to Apply for Exemptions

• Early assessment: Don't wait until enforcement action
• Before marketing: Exemptions needed before letting property
• Portfolio approach: Consider exemptions across multiple properties
• Professional advice: Complex cases benefit from specialist help

Alternatives to Exemptions

• Phased improvements: Spread costs over multiple years
• Grant funding: Reduce net costs below £10,000 threshold
• Alternative technologies: Consider different improvement approaches
• Property disposal: Sell rather than upgrade if uneconomic