1 April 2018: an important day for more than just April Fools

April Fool’s Day 2018 will not just see the arrival of exceptionally crazy headlines in the tabloid press, but also the introduction of new rules governing the provision of Energy Performance Certificates (EPCs). EPCs are already a feature of the residential market, and will from 1 April 2018 also begin having a substantial impact upon the commercial property market. While arguably well intentioned by the Government, with the aim of helping to improve the energy efficiency of buildings generally, the requirements will be onerous for landlords and developers of commercial property.

The regulations are lengthy and far reaching. Our handy Q&A below should help you to get a grip on the changes.

What is an EPC?

Many people may already be familiar with EPCs because they are already a common feature in residential transactions.

If you have not yet come across an EPC: an EPC is a certificate issued by a certified assessor giving information about the energy efficiency of a property. It has to include, amongst other things, the energy “asset rating” of a property (also known as the “EPC rating”) and a recommendations report.

When will an EPC need to be provided?

From 1 April 2018, the properties that will need to have EPCs will include new build commercial “non-exempt” properties. EPCs will also need to be provided on the grant of a new lease or upon the sale of non-exempt property. See below for details of what a “non-exempt” property is.

Opinion is currently divided on whether EPCs need to be provided on the grant of a renewal lease of non-exempt property. The guidance to the regulations suggests that no EPC will be needed on lease renewal; however the regulations are not entirely clear on the point. We hope that further clarification will be provided before the regulations come into force.

EPCs will often need to be provided under statute even though they might be of little practical value – so, for example, you would need to provide an EPC if you were granting a short term lease of a commercial unit, even though because of the length of the term of the lease the information will be of little value to the tenant. Similarly, you would need to provide an EPC even if the tenant is not actually paying the utility bills.

Which properties are exempt?

There is a long list of properties that are exempt from the regulations. They include the following:

• properties that do not have a roof or walls (e.g. a multi-storey car park with open sides);
• properties that use no energy to condition the inner parts i.e. have no heating, ventilation or air conditioning equipment;
• properties that are not designed or altered to be used separately, e.g. the common parts of a building;
• listed buildings if “compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance”;
• temporary properties to be used for two years or less;
• industrial sites, workshops and non-residential agricultural properties with a low energy demand (although low energy demand is not defined); and
• buildings earmarked for demolition. The test for proving this is strict – for example, if the building is being sold, there must be evidence that the building is being sold or rented out with vacant possession, is suitable for demolition, and the resulting site is suitable for redevelopment.

When should an EPC be displayed at the property?

You may by now have noticed that some buildings already display energy information. EPC should be displayed in commercial buildings when produced if the building satisfies all of the following criteria:

• larger than 500m²;
• frequently visited by the public; and
• “not an exempt property”.

What happens if you don’t obtain an EPC?

The risk of not providing an EPC to a tenant/ purchaser is that a copy of the EPC will be requested by an enforcement officer, and upon finding that none exists, and there is no legitimate excuse (see below), they will have power to issue the person who was liable for providing the EPC (the “dutyholder”) with a penalty charge notice.

Enforcement and regulation of the provision of EPCs will be a localised matter.

Enforcement and checking that EPCs have been provided where necessary will usually be a task for the local Trading Standards. They can however only request a copy of an EPC from the dutyholder within the six month period after the EPC was required to be given.

The enforcement officer may levy a penalty of 12.5% of the rateable value of the building from dutyholders who failed to give EPCs for commercial property. The maximum penalty that can be levied on a dutyholder is however capped at £5,000.

What is a legitimate excuse?

It is worth noting that there are some regulated “legitimate excuses” for failing to have an EPC. These include:

• “Emergency Lettings”, i.e where the EPC was not supplied before completion, but has been supplied ASAP thereafter;
• an EPC was commissioned before marketing, but was not obtained within seven days of marketing, despite using reasonable efforts to obtain it; and
• there was no duty to commission an EPC before marketing, and when there was a duty to obtain one, the dutyholder used all reasonable efforts to obtain it by the relevant time.