Rent indexation limited depending on the value of the energy performance certificate EPC
From October 1, 2022, the rent for the most energy-intensive rental properties will be frozen for 1 year. In concrete terms, landlords will not be allowed to apply the annually indexation of the rent for all homes with an EPC label E or F and for buildings without an EPC. For properties with label D, the rent indexation will be limited to 50%. This way, the Flemish government wants to encourage landlords to renovate more quickly in order to significantly reduce energy consumption, and to keep housing affordable for tenants Our team will be happy to provide you with further details.
Indexation freeze on all leases?
The measure applies to all residential rental agreements concluded before October 1, 2022 and to all residential properties where the tenant establishes his main residence. Second homes, student rental agreements and commercial properties are therefore exceptions. For a period of 1 year (up to September 30, 2023), indexation of rents is only allowed for properties with a valid EPC label and an EPC score of A+ (very energy efficient) to C. For homes without an EPC label or houses with EPC label E or F, the landlord can apply another indexation at the earliest on October 1, 2023 and this with a modified formula. For properties with label D, the rent indexation will be limited to 50%. The landlord calculates the difference between the current rent and the indexed rent. That amount divided by 2 can be added to the current rent.
Ignore and still apply the indexation?
If a landlord nevertheless applies the indexation, the tenant is in no way obliged to pay it. He may legally continue to pay the previous rent. The tenant may always request the valid EPC certificate of his rental property. Keep in mind that an EPC issued before October 1, 2012 is no longer valid and that an EPC valid at the time of signing the lease but expired in the meantime (after 10 years) is not valid either. In case of doubt or conflicts tanants can seek assistance from tenant unions. These organisations will provide the necessary support. If the situation escalates to the justice of peace, the judge will only determine that indeed the rent is wrongly charged too high. Improving the energy label of the rental property is the only way to further index your rent.
Energy-efficient renovations and indexatino of the rent!
Landlords with energy-guzzling homes in their rental portfolio may be eligible for financial support measures for energy-efficient renovations. If the house achieves an EPC label C or higher after renovation works, the rent may be fully indexed from that moment on. If you renovate up to label D, you can index the rent for 50%. Since the label only takes effect from the date of the new certificate, as a landlord you are only allowed to go back 3 months in time, as is the case with a normal rent indexation. In view of the further plans of the Flemish Government, energy renovation is recommended in the long term, also to safeguard the value of your property.
Energy efficiency is a crucial factor in the valuation of any home. Not only in sales but also in rentals, the EPC plays an increasingly important role. Energy-guzzling homes will get a harder time on the rental market. In the coming years, the Flemish government will continue to encourage all owners to energetically renovate their patrimunium to achieve the highest possible EPC label.
If you are a landlord, tenant or prospective tenant and you have questions about rent indexation, do not hesitate to contact our team.
If you want to learn more about how the EPC value affects your future rental or sales value, please do make a non-committing appointment with our expert estimator.