The £3,500 exemption most landlords don't know about: What the new EPC rules mean

Two sets of EPC rules apply to private landlords in England and Wales simultaneously, and confusing them is a common source of compliance uncertainty. The current minimum standard is Band E, supported by a £3,500 cost cap and several specific exemptions that allow landlords to let legally even where improvements fall short. The incoming standard, confirmed by the government as Band C by October 2030, brings a separate framework with its own cost cap and exemption categories. Both matter, and the £3,500 exemption in the current system is the one that most landlords have either not heard of or not used.

The current rules: Band E and the £3,500 cost cap

The existing MEES regulations require all privately rented properties in England and Wales to hold a minimum EPC rating of Band E before they can be legally let. This has applied to all tenancies since April 2020. Where a property currently sits below Band E, a landlord must either carry out the improvements required to reach it or register a valid exemption on the PRS Exemptions Register before continuing to let.

The critical point that the HomeOwners Alliance's August 2026 guide highlights is the cost cap within the current regime. Landlords are not required to spend more than £3,500 including VAT on improvements to reach Band E. Where a property cannot be brought to Band E within that cap, the landlord is entitled to register a high-cost exemption.

Specifically, the high-cost exemption under the current rules applies where the cheapest recommended improvement on the property's EPC would itself cost more than £3,500 including VAT. If even the most affordable measure recommended cannot be implemented within the cap, the landlord can register the exemption and continue to let the property legally. The exemption must be registered on the PRS Exemptions Register at gov.uk.

The exemptions many landlords are missing

A property that falls below Band E and has not been improved does not simply become unlettable. It becomes unlettable without a valid registered exemption. The distinction matters because the exemption route is available to a significant number of landlords who either do not know it exists or assume they must achieve Band E regardless of cost.

Several further exemptions apply within the current framework. Where a landlord has made all the improvements recommended by the EPC and the property still falls below Band E, they can register an all-improvements-made exemption. Where third-party consent, such as that of a freeholder or a tenant, cannot be obtained for the required work, a third-party consent exemption is available. Where improvements would damage the property structure, a negative-impacts exemption applies. All must be registered formally and are valid for five years.

The incoming Band C standard

The government confirmed its plans for a minimum Band C standard by October 2030 for private landlords in England and Wales, in its response to the EPC consultation. According to the HomeOwners Alliance's analysis, the new cost cap under the incoming regime will be £10,000 per property, not £3,500. For lower-value properties, that cap is reduced: where £10,000 would exceed 10% of the property's value, the effective cap is 10% of the property's value instead. Any spending on energy efficiency improvements since October 2025 counts toward that cap. Where a landlord has spent up to the £10,000 cap and the property still cannot reach Band C, an exemption can be registered, valid for ten years.

The exemption categories under the new standard include the same high-cost route: if the cheapest recommended measure would exceed the cost cap including VAT, the landlord may register the exemption. This mirrors the current regime but at the higher £10,000 threshold.

This is confirmed government policy but secondary legislation to make it mandatory has not yet been passed. Landlords should plan for the 2030 standard while treating it as highly likely rather than legally enacted.

Talk to our lettings team about your EPC compliance plan