The issue
Increasingly the government is seeking to regulate energy efficiency and carbon emissions in connection with buildings.
What’s new?
As part of this move towards a greener property sector, new regulations will come into force from 6 April 2008 relating to the energy performance of commercial buildings.
The new regulations will require owners, landlords and builders of commercial property to provide Energy Performance Certificates (EPCs). This follows on from the introduction of EPCs as part of the Seller’s Information Pack for domestic properties.
In addition larger public buildings will need to display Display Energy Certificates (DECs) and air conditioning systems will become subject to periodic mandatory inspections.
The timetable
The regulations will come into force incrementally. The key dates are:
6 April 2008
EPCs will be required on commercial buildings with a total “useful floor area” (as defined in the regulations) of over 10,000m2 (subject to transitional arrangements).
1 July 2008
EPCs required on commercial buildings with a total useful floor area of over 2,500 m2 (also subject to transitional arrangements).
1 October 2008
EPCs required on all remaining commercial buildings and DECs for all public buildings with a total useful floor area of over 1,000m2.
4 January 2009
1st inspections must have taken place for all air-conditioning units of over 250kW, followed by 5 yearly annual inspections.
4 January 2011
1st inspections must have taken place for all air-conditioning units of over 12kW, followed by 5 yearly annual inspections.
How will it work?
Each EPC will give an energy performance asset rating for the building, graded from A to G. Grade A being the highest rating. The higher the rating the more energy efficient the building and the lower fuel bills are likely to be. EPCs will look similar to the energy labels now issued with domestic appliances.
Asset ratings will vary depending on a number of factors, including use, the nature of the building fabric and services systems.
Each EPC will be accompanied by an advisory report containing recommendations as to how to increase the energy efficiency of the building, although there is no statutory requirement to implement the recommendations of the advisory reports.
EPCs will remain valid for 10 years, or until superseded by a new EPC. All EPCs and advisory reports are to be registered with the Local Authority and stored on a national database register.
Public authorities or public institutions occupying buildings with a total useful floor area of greater than 1,000m2 must display a DEC and have a valid advisory report in their possession. DECs must be renewed annually.
Some types of building are excluded from the requirement for an EPC. These include industrial sites, workshops and non-residential agricultural buildings with low energy demands, stand alone buildings of less that 50m2, temporary buildings, buildings due for demolition and places of worship.
What will you have to do?
EPCs must be provided by sellers and landlords to all prospective buyers and tenants free of charge. However, Government guidance indicates that EPCs will not be required on lease renewals, extensions or surrenders or on compulsory purchases.
Under the transitional arrangements properties over 10,000m2 that are already on the market before 6 April 2008 will not require an EPC before the property is sold or let. However, when a contract for sale or let is exchanged an EPC must be provided as soon as reasonably practicable. Similar provisions apply to properties over 2,500m2 on the market before 1 July 2008. These transitional arrangements will end on 1 October 2008, so relevant properties still on the market after that date will require EPCs before sale or letting.
When a commercial building is constructed it will be the responsibility of the builder to obtain an EPC and pass it to the owner. The builder should also notify Building Control, who will not issue a building regulations completion certificate until they are satisfied that an EPC has been produced.
Assessments for EPCs can only be undertaken by registered assessors. A list of assessors can be found on www.ndepcregister.com.
The future
Looking ahead to January 2009, air-conditioning systems with a cooling capacity larger than 12kW will need to be inspected by an accredited energy assessor at least every 5 years. The assessors will produce a report covering efficiency and possible improvements to the system.
Local Authorities will enforce the new regulations and fines for failing to provide an EPC will range from £500 to £5,000 depending on the rateable value of the property.
It is difficult to predict how significant an impact the introduction of EPCs will have on the commercial market. The Guidance indicates that if contracts are exchanged before the deadlines the duty to make available an EPC will not arise. This could lead to a rush to exchange leading up to each deadline.
The bottom line is that if you are an owner of commercial property, whether you are letting it to tenants or planning to sell, you will need to demonstrate your environmental credentials in order to satisfy the new regulations.