EPCs: Are you ready for the new regime?
23 October 2007
With all the fuss about energy certificates in HIPs, little attention has been given to the fact that Energy Performance Certificates (EPCs), will soon become mandatory on all commercial property sales and lettings.
The Regulations
The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 (following an EU Directive) entered the statute books on 29 March 2007.
Timescales
From 6 April 2008 owners will need to provide a valid EPC for any building over 500 sq metres on any sale or leasing transaction. The EPC shows the energy efficiency rating on a scale of A to G, similar to the ratings on white goods. Although the EPC will contain recommendations to improve the efficiency, there is no obligation on the owner to implement those proposals.
From 1 October 2008 the requirement for an EPC will extend to all non-dwellings sold or leased (not just those over 500 sq metres). The length of the term of any lease is irrelevant.
Exemptions
There are very few exemptions:
- Places of worship
- Temporary buildings (lifespan of 2 years or less), industrial sites, workshops and non-residential agricultural buildings with low energy demand
- Stand alone non-residential buildings with a floor area of less than 50 sq metres (i.e. sheds)
- Buildings due to be demolished
Thus certainly by October next year, converted farm buildings let out for office purposes will require such certificates; and busy light industrial workshops may well require them as well.
Time of supply
The obligation to provide the certificate is triggered by:
- someone requesting information about the building or
- when a buyer/tenant views the building or
- exchange of contracts/lease.
If it is a new build, then an EPC is not required for off-plan sales but the premises will require a predicted energy certificate and a full EPC will follow on construction.
The EPC will last for ten years. Any EPC provided to prospective buyers/tenants may not be more than 12 months old when the building is first marketed. In the case of buildings made up of separate commercial units with a common heating system then one EPC may be produced for all the commercial parts.
Fines of between £500 and £5000 will be imposed if a valid EPC is not produced up to 6 months after it was required.
Action
If the premises are already leased when the regulations become operative, there is no need to provide the certificate; but if the owner then sells or relets or if the tenant assigns his lease, then an EPC will be required. The owner will need to build the costs of the EPC into the general expenses of the sale or letting.
In leases granted from now on:
- provision will need to be made for the tenant to bear the costs of the EPC if one is required on an assignment
- in a multi-let building, the costs of an EPC should be borne through the service charge
- rights of entry must take account of the need for inspections, and for the landlord’s right to carry out recommendations
- drafting will be required from the landlord’s point of view to ensure that lack of implementation of EPC recommendations will not depress rent at a rent review - or alternatively that if a landlord implements the recommendations he can demand a higher rent
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