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Energy Performance Certificates

Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007

From 6 April 2008 the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 (“the Regulations”) require Landlords or sellers to produce Energy Performance Certificates (“EPCs”) for the construction, sale or renting out of non-domestic premises with a total useful floor area of more than 10,000 square metres.  This will be extended to non-domestic premises over 2,500 square metres on 1 July 2008 and on 1 October 2008 all remaining buildings that are not domestic will need EPCs.

An EPC certifies the energy efficiency of the building (much like an energy rating for a washing machine).  The Regulations specify information to be included within the EPC.  The following would be needed:

1. The asset rating of the building – this shows the performance of the building and its services.  Prospective buyers and tenants can use this rating to compare properties.  It follows that an A rating (very efficient) would be worth more to a Tenant or Buyer than a G rating (the least efficient) – if for no other reason than that an ‘A’ rated property will cost less to operate after completion (costs of heating, lighting etc).  It will also help prospective buyers and sellers to establish which properties would need remedial works to improve their energy efficiency.

2. A reference number – EPCs must be registered and once registered will be given a reference number.  A copy of the EPC can only be obtained if the reference number is quoted.  The register enables a buyer or tenant to confirm that the EPC is valid.  It also allows the Government to use the data for research purposes and for accreditation scheme operators to ensure quality is maintained.  It is worth mentioning that the need for the reference number to access the certificate is intended to limit public access, protecting the privacy of the owners and occupiers.  It is a criminal offence to unlawfully disclose an EPC.  The fine can be up to £5,000.

3. The address of the building.

4. An estimate of the useful floor area of the building.  The Regulations do not specify how this is to be measured but guidance has been issued by the Department for Communities and Local Government.

5. The name of the energy assessor and their company details.  All assessors must be accredited and the EPC must also state to which accreditation scheme they belong.

6. The date on which the EPC was issued.

The EPC must also be accompanied by a recommendation report.  This will set out suggestions for cost-effective alterations and more extensive and expensive improvements to increase energy efficiency.  When a building is being sold or rented then (subject to the relevant implementation dates for certain buildings – 1 July and 1 October 2008 – being passed) the seller or landlord must provide the buyer or tenant with a valid EPC and recommendation report free of charge.  This would usually be the earlier of the date on which:

1. Written information is given to a person who has requested information.

2. The prospective buyer or tenant views the building.

3. A contract is entered into.

The seller or landlord does not have to provide the EPC if they have reasonable grounds to believe that: 

(i) the prospective buyer or tenant has insufficient funds;

(ii) is not genuinely interested in buying or renting the property; or

(iii) is someone to whom the landlord or seller would not want to let or sell.  

Care should be taken in connection with (iii) above to ensure no unlawful discrimination takes place.

Although the Regulations require the EPC to be supplied free of charge, the matter of cost is being considered across the property industry.  On a sale the seller would simply have to bear the costs as part of the general sale costs.  Matters are not so straightforward with leases and alternative arrangements can be made subject to agreement by the parties (e.g. a contribution from the tenant with the tenant being authorised to disclose the EPC to prospective assignees or sub-tenants).

Not all commercial properties fall within the Regulations’ definition of building.  A building is “…… a roofed construction having walls, for which energy is used to condition the indoor climate.”  Buildings that only have hot water and electric lighting do not therefore fall within the Regulations and would not need an EPC.  Certain properties are also automatically exempt.  These specific properties include:

1. Buildings used primarily or solely for worship.

2. Temporary buildings (2 years or less).

3. Industrial sites and non-residential agricultural buildings with “low energy demand”.

4. Stand-alone buildings with a total useful floor area of less than 50  square metres which are non-domestic.

6. A building that is to be demolished.

In the case of exemption by reason of demolition the seller must be able to comply with certain specified criteria.

An EPC is valid for 10 years but must not be more than 12 months old when the property is first marketed.  The penalty for failing to supply an EPC when selling or renting out commercial property is in most cases 12.5% of the rateable value, subject to minimum and maximum penalties of £500 and £5,000 respectively.

From 1 October 2008 occupiers of certain buildings are required to display a DEC, a display energy certificate, in a prominent place.  This will allow the public to compare the energy efficiency of public buildings and will only apply to institutions providing public services.

The Regulations also impose obligations on those who are in control of certain air-conditioning systems, i.e. those with a maximum output of more than 12kw.

Some lenders are offering discounted rates for energy efficient homes or for loans to make energy efficient improvements.  We will have to wait and see whether these preferential lending products make it into the commercial market place.

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