Landlords Steer Clear of Leasehold Flats Over EPC C Targets and Service Charge Pressures
A letting agency has raised concerns that landlords are increasingly reluctant to let leasehold flats, citing the twin challenges of meeting EPC C targets and grappling with service charge complications.
Survey Reveals Leasehold Flats Are Being Shunned
According to the latest Lettings Report from Leaders Romans Group (LRG), 58% of flats let by private landlords are leasehold. However, more than a third of these landlords—34%—now say they actively avoid leasing such properties. The reasons? The inherent complexity and unpredictability associated with leasehold structures, lack of direct control over communal aspects, and opaque building management systems (Property Soup, IFA Magazine).
The report further reveals that 46% of leasehold landlords consider their main challenges to be service charges, co-ordinating communal repairs, or having no control over building-wide decisions, all of which influence decisions to invest—or refrain from investing—in leasehold flats (Property Reporter, IFA Magazine).
LRG warns that over half of landlords currently letting at least one flat (58%) are now reconsidering their position on renting leasehold properties (IFA Magazine, Property118).
EPC C Target: A Major Barrier to Leasehold Lettings
The cost of upgrading leasehold properties to meet the government’s proposed Energy Performance Certificate (EPC) C requirement is a critical disincentive. With estimates placing the cost at nearly £7,000 per leasehold flat—and even higher for older or poorly maintained buildings—many landlords are putting the brakes on letting flats entirely (Property118).
Recent government proposals set out ambitious energy efficiency targets, mandating that all private rental properties achieve EPC C by 2030 (and by 2028 for new tenancies), with a cost cap for required works set at £15,000 (Property118, Letting Agent Today). However, influential industry body Propertymark warns that this cap is unrealistic; they recommend a more manageable £5,000 cap, warning that the higher amount may drive landlords out of the market or force substantial rent increases that hurt tenants (Property118).
This situation echoes similar findings from Rightmove, which analysed EPC data and concluded that poorer households and landlords of lower-value properties face the heaviest financial burdens. Rightmove estimated it could cost £8,074 per rental property to reach EPC C, with a total cost of £23.4 billion needed to retrofit all rentals—painting an affordability crisis for the rental supply (The Times).
Tenant Sentiment: Support for Greenness, Reluctance on Costs
There’s strong tenant demand for greener homes—but it doesn’t always translate into financial willingness. An LRG tenant survey found that 80% of tenants favour their properties being upgraded to EPC C or above, yet only 6% are willing to pay more rent to fund these improvements (Leaders, LandlordZONE).
One landlord commented succinctly: upgrading older properties to meet EPC C could cost tens of thousands of pounds, and many landlords simply “cannot face the cost”, leading to fears of exodus from the rental market or even eviction of tenants to avoid non-compliance (Leaders, LandlordZONE).
Policy Landscape: Reform Is Urgent
Allison Thompson, National Lettings Managing Director at LRG, emphasises the vital role flats play, particularly for first-time renters and young professionals. But many landlords say they cannot meet expectations due to lack of control over the broader building environment—somewhere leasehold structures act as an obstacle, not just an ownership model (Property118, Property Reporter).
Thompson notes: “This is not about unwillingness; it is about feasibility.” She stresses that leasehold reform is essential to raise housing standards meaningfully and ensure tenants have the modern, efficient homes they expect (Property118).
Emerging Leasehold Reform: A Ray of Hope?
Progress is underway in addressing structural leasehold issues—for both tenants and landlords. The Leasehold and Freehold Reform Act 2024, which received Royal Assent on 24 May 2024, aims to modernise leasehold practices across England and Wales (House of Commons Library, Wikipedia).
Key provisions include:
- Making lease extensions more accessible and affordable
- Abolishing “marriage value”
- Standardising lease terms to 990 years, often with ground rent reduced to a peppercorn (zero cost)
- Improving transparency and accountability around service charges
- Simplifying the process for leaseholders to manage or even take over building management (House of Commons Library, Wikipedia)
However, implementation faces delays and challenges. The government has been cautious in rolling out certain provisions, anticipating unintended consequences or legal initiatives from freeholders. Some sections remain paused, and it is unclear when full enforcement—particularly for ageing or complex buildings—will take effect (Wikipedia).
Energy Policy Context: EPC Targets and Broader Impacts
The push for EPC C is part of a broader energy-efficiency and net-zero strategy for buildings. Government consultations propose reforms to the Energy Performance of Buildings (EPB) regime, including updated metrics for EPCs, improved data management, and stronger quality control, with possible rollout during late 2026 (GOV.UK).
Meanwhile, financial modelling from UK Finance suggests that if supporting policies and funding are in place, up to 60% of mortgaged buy-to-let (BTL) properties could achieve EPC C by 2030. Without adequate support, full compliance may not be reached until 2037–2043 (UK Finance).
For tenants, the consequences of delays are tangible: a Guardian analysis indicates that delays in imposing higher EPC standards may cost English renters over £1 billion in additional energy bills (The Guardian).
The Broader Picture: Housing, Policy, and Affordability
Issues of EPC compliance, leasehold reform, and service charge management converge in the larger UK housing crisis.
Two key political axes stand out:
- Labour advocates for ending leasehold entirely in future reforms and proposes stronger renters’ rights, including banning “no-fault” evictions. However, sweeping abolition of leasehold has been tempered due to practical obstacles (The Times).
- The Conservative approach has been more incremental—addressing ground rent and making it easier for leaseholders to extend or acquire freeholds, rather than scrapping leasehold wholesale (The Times).
Meanwhile, Rightmove data emphasises the socio-economic divide in energy improvements. Wealthier homeowners are completing retrofits at a much faster rate. By contrast, homeowners and landlords of modest properties face daunting retrofit costs—some in excess of £10,907 per household—which threatens long-term rental supply and tenant affordability (The Times).
Conclusions and Outlook
- Leasehold complications are discouraging landlords: Constraints in control, cost, and coordination are pushing 34% of landlords to avoid leasehold flats altogether.
- EPC C targets add financial pressure: With upgrade costs averaging around £7,000—and caps set at £15,000—many landlords feel unable to invest, especially with limited tenant willingness to share the cost.
- Tenant demand is not translating to affordability: Tenants favour greener homes but resist rent increases to fund upgrades.
- Policy reforms offer some promise: The Leasehold and Freehold Reform Act 2024 aims to modernise leasehold—but implementation remains slow and partial.
- Energy policy and investment lag: Without more significant subsidies, tailored funding, and realistic timelines, many landlords will struggle to comply; UK Finance warns of multi-decade delays.
- Wider housing affordability issues loom large: Political solutions and financial supports are urgently needed to safeguard rental supply and tenant welfare.