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Commercial Energy Performance Certificates

How do Energy Performance Certificates affect businesses?

Energy Performance Certificates (EPCs) are now required when property owners build, sell or rent out flats and commercial properties. New responsibilities are now imposed on anyone constructing a new building or selling or renting out an existing property.

The certificates are much the same as those required as part of a Home Information Pack when selling a house. They rate a property’s energy efficiency by giving it a grade from A to G. A is the most efficient and G is the least.

From 6th April, EPCs are required for the construction, sale or rent of commercial properties with a floor area of more than 10,000 square metres. From 1st July, the threshold will be reduced to 2,500 square metres and from October the regulations will be extended to apply to all remaining buildings apart from a few minor exceptions.

When should EPCs be provided?

When a new building is completed, the person responsible for the construction will need to obtain a certificate and provide it to the owner. This is obligatory under Building Regulations. The same thing applies if a building is converted into more or fewer units and there are changes to the heating and hot water provision or to the air conditioning system.

When selling an existing building, the owner will have to provide a certificate for all prospective buyers. Landlords will have to do the same for prospective tenants of commercial properties. However, there is no need to provide a certificate for an existing tenancy; only for a new one. Commercial property certificates are valid for 10 years and if they are still in date when a tenancy changes there is no need to obtain a new one. The regulations will be extended to landlords renting out homes from 1st October.

Who undertakes the Energy Performance Assessment?

The certificates must be provided by energy assessors who are accredited and registered with a government approved scheme. The energy assessments are carried out using standard methods making standard assumptions about energy usage so there can be consistency when comparing the energy efficiency of different buildings. It allows prospective buyers, tenants and occupiers to make energy efficiency and potential carbon emissions a factor when deciding which property to choose.

The Government hopes this will provide a market pressure to encourage sellers to ensure a high standard of energy efficiency to make the property more attractive to potential buyers and tenants.  The certificates are accompanied by recommendations on how to improve the energy efficiency of the building. There is also information about the energy rating that could be achieved if the assessor’s recommendations were carried out.

(The Energy Performance Certificates should not be confused with Display Energy Certificates (DECs) which show the actual amount of energy being used in a building. They will be required from 1st October for buildings over 1000sq metres occupied by a public authority or an institution that provides a service to a large number of people.)

Who pays for the EPC?

Normally the landlord/ developer will be liable for this expense. It may be possible for a landlord to recover this cost through the lease, depending on the exact provisions within it.

How much does an EPC cost?

The cost of an EPC will depend on a number of factors. Clearly the cost of an EPC for a city centre office block will differ greatly from a certificate for a small shop. Amongst other factors that will greatly affect the price will be the availability of up to date plans and mechanical and electrical layouts, and how easily accessible the area to be surveyed is.

Penalties for not providing an EPC

The penalty for not providing an EPC is 12.5% of the rateable value of the building, within minimum and maximum limits of £500 to £5000. Additional penalties will be imposed for further non compliance.

Which buildings are exempt?

Some buildings are exempt from the regulations but not many. EPCs will not be required for places of worship, stand alone buildings of less than 50sq metres (except for homes), temporary buildings which will not be used for more than two years and buildings with a low energy demand such as barns and farm outbuildings. In some circumstances, buildings due to be demolished may be exempted.

Understandably, many people regard the new regulations as yet another administrative burden. For others, however, they are an opportunity to improve their chances of selling or renting out a property by making it more energy efficient and so more attractive to prospective buyers and tenants.

Next steps

If you are a developer planning a new scheme, or a landlord planning to sell or rent out a building you should familiarise yourself with the regulations prior to commencing your transaction.

The Government guidance can be found here:

www.communities.gov.uk

Alternatively please contact us to discuss your proposed development or transaction so that we can give you an overview of your duties and put you in contact with an energy assessor if further detailed advice is required.

You should bear in mind that Energy Assessors are currently in huge demand, so you should plan this part of your project as early as you can to avoid delaying your completion.