Energy Performance Certificates - a repeat of the HIPs shambles?
ENERGY PERFORMANCE CERTIFICATES - A REPEAT OF THE HIPs SHAMBLES?
The introduction of Energy Performance Certificates for commercial properties bears striking similarities to the ill-fated Home Information Packs. Numerous delays and amendments have led to confusion but what’s the situation now and will the certificates add value? Nigel Haynes (pictured below), head of the Nottingham Real Estate Group at regional law firm Freeth Cartwright LLP, examines some of the issues.
The requirement to make Energy Performance Certificates (EPCs) available on the sale or letting of commercial property is at last starting to take effect.
The gestation has been prolonged - regulations published in March 2007 followed by various guidance, delays in accreditation of assessors and confusion on the detailed requirements - a familiar and worrying parallel with the introduction of Home Information Packs.
Before looking at where we are now a reminder of the essential requirements is helpful. The 2007 Regulations oblige a prospective seller or landlord to make an EPC available at no cost to any prospective buyer or tenant of its building at the earliest opportunity during marketing and in any event before the contract to sell or lease is entered into.
EPCs also apply to construction of new buildings and modifications designed to deliver fewer or more parts for separate use. The EPC rates the energy performance of the building, lasts for 10 years and is accompanied by a report recommending any actions which could improve the rating.
As with HIPs, the regulations have suffered repeated amendment to stagger and delay implementation leading to confusion as to what property owners actually need to do on the relevant dates. Broadly the position is an EPC is required:
• from 6th April 2008 for any building ( including any relevant part ) with floor area exceeding 10,000sq m
• from 1st July 2008 for buildings over 2,500 sq m; and
• from 1st October for all remaining buildings.
A further relaxation was announced last March to the effect that if the building is already being marketed at its relevant commencement date a seller / landlord is only obliged to start making efforts to obtain an EPC once the contract has been exchanged and must be obtained no later than October 1, 2008.
Inevitably, there are numerous unanswered questions in areas such as the effect of modification of buildings, exemptions and application of the requirement at all. For example, it is not clear what extent of modification to a building is required to trigger an EPC and “not for value” transactions are exempt but there is no guidance on what “not for value” actually means.
It is also clear that although the language of the regulations is pretty simple, it does not fit more complex transactions such as options and share sales.
Furthermore there still seems to be a shortage of assessors accredited to the relevant levels for all buildings including the highest grade of complexity - level five. The reasons for this are not clear, but it may be that the parallel with HIPs has caused potential applicants to think twice.
So where does this leave us? In another fine mess. Against a background of uncertainty and currently limited numbers of assessors (anyone reminded again of the HIPs fiasco?), one can only hope Local Trading Standards officers who will enforce the regime will not be handing out maximum penalty fines (£5,000 depending on rateable value) for breaches.
Looking ahead and assuming the regime settles down, EPCs may become more significant if a high rating adds value to a building. Don’t ignore the regime - the potential penalties demand that but the market needs to be alert as the Government is already considering reducing the validity of EPCs to only two or three years.
ends - 23 May 2008