Legal advice: Energy Performance Certificates

Under a new EU Directive, Energy Performance Certificates (EPC) are now required whenever a building is constructed, sold or rented. The introduction of HIPS or Home Information Packs (which include an EPC) was well publicised and we are all aware that anyone who wants to sell their house needs to prepare one and to bear the cost of doing so.

However, people are less well informed about the need to produce an EPC on the sale or rental of a commercial building. It is very important that licensees and landlords are prepared for this new requirement, as failure to comply could lead to fines of between £500 and £5,000.

TimescalesThere is a phased introduction to meet this requirement, with large commercial buildings already affected, as of April 6, 2008. (For the definition of 'large' see below).

Most pubs, clubs, restaurants and hotels will fall into the size banding which requires certification from October 1, 2008, by which stage all other commercial buildings will be affected.

This has implications for all those who own, develop, occupy or manage buildings and applies to short-term lettings, including tenancies-at-will. For many in the leisure and hospitality industry it is likely to be seen as another piece of legislation which will have an impact on profits.

Producing an EPC

An EPC will include an asset rating indicating the energy performance and carbon emissions of the building expressed on a scale of A-G, similar to the rating system already used for home appliances.

It must also include a recommendation report in which the energy assessor makes suggestions as to how the energy performance of the building could be improved.

An EPC is produced by a trained and registered energy assessor and must be provided by the landlord or seller of a building free of charge to the prospective purchaser or tenant. A prudent landlord will arrange for an EPC to be produced in advance so that this does not hold up any potential sale or letting.

There will inevitably be a huge demand for EPCs initially and there is a concern that there are not enough energy assessors who are trained to produce an EPC for large or complex multi-let commercial premises.

In addition, press reports indicate that EPCs for such complex buildings could cost up to £10,000 to produce. The good news is that an EPC for a commercial property is valid for 10 years.

The cost of the new legislation

Recent research has shown that investors expect 'price chipping' to emerge during rent and lease negotiations if a building has a poor energy rating, but the industry expects only a negligible effect on property values.

The market does not yet appear

to see a clear business case for upgrading buildings, which is clearly the real aim behind the new legislation.

Air conditioning

It is worth noting that the legislation also requires regular inspections by an energy assessor of all air conditioning systems with a maximum output of more than 12kw, as outlined in the panel above. n

• Communities and Local Government Department Guidance can be found online at www.communities.gov.uk. A model form of an EPC can be seen on this website.

Implementation timetable for EPCs for commercial property

All newly constructed commercial property - April 6, 2008Sale or letting of all commercial property with a floor area of over 10,000m2 - April 6, 2008 Sale or letting of commercial property with a floor area of over 2,500m2 - July 1, 2008 Construction, sale or rental of all remaining commercial property - October 1, 2008 Display certificates required for all public buildings with a floor area more than 1,000m2 - October 1, 2008