EPCs: all you need to know

Thinking of selling your pub before the end of the year? Well read on, because Energy Performance Certificates (EPCs) will become a vital element in selling your pub.

And with a predicted shortage of assessors it is time to start thinking now about how it could affect you.

Here Matthew Grindley of solicitors stevensdrake explains all you need to know…Why are EPCs being introduced?

One of the ways in which the government and the European Union are aiming to reduce the effects of climate change is through greater energy efficiency. The government has signed up to the Kyoto Protocol and is committed to reducing energy consumption. Buildings are a major source of greenhouse gas emissions both in their construction and energy usage during their lifespan. When are EPCs being introduced?

An EPC will be required for all commercial premises from October 1. The government has announced a phased timetable for the introduction of EPCs for different types of commercial premises. The first phase, relating to the construction, sale or letting of commercial premises with a floor area of over 10,000msq came in on April 6. This does not cover most pubs.

However from July 1, EPCs will be required on the construction, sale or letting of commercial property with a floor area of 2,500msq.

What does an EPC involve?

Every time a commercial property whether new or existing, is sold or let, an EPC of no more than 10 years old will have to be produced.

The principal characteristic of an EPC is the asset rating, which indicates the energy performance and carbon gas emissions of the building. The asset rating will be on a scale of A-G. The EPC must also incorporate a recommendation report specifying how the energy efficiency of the building can be improved.

The certificate can only be produced by a qualified energy assessor.

How much will an EPC cost?

This has been the cause of great debate. The government has intimated in its regulatory impact assessment that the cost of producing an EPC for complex multi-let commercial premises will come in at approximately £1,790. However, the government appears to have underestimated the true cost given the scarcity of qualified energy assessors, Recent press reports suggest EPCs for the larger or more complex buildings could cost in the region of £10,000.

Who will pay?

The regulations are silent on this issue. It is somewhat inevitable that negotiations will take place between owners, tenants and their advisors as to who is to bear the cost but the most likely outcome is that it will be the responsibility of the landlord. The question remains, however, as to whether the owner will be able to recover the cost of this through the service charge?

For leases granted post-April 6, it will be for the parties to negotiate whether the landlord can recover the cost of the EPC through the service charge provisions and careful drafting will be required in this respect.

Owners may argue that tenants will derive benefit from the production of an EPC as they will be able to make use of it on any subsequent assignment or underletting. This argument may not necessarily win through in all cases. There will be no reference to EPC's in leases pre-dating April 6 and it will be a point of debate as to whether the cost can be recovered through the "sweeping up" service charge provision (if any) contained in the lease.What are the penalties for non-compliance?

It is for the seller/landlord to provide an EPC on any sale or letting.

The responsibility for enforcing the seller's/landlord's obligation to produce an EPC will fall on the shoulders of trading standards. Under the regulations, the maximum sanction is a civil penalty equal to 12.5 per cent of the rateable value of the premises - minimum £500, maximum £5,000.

Failure to commission an EPC following enforcement by trading standards may well result in an additional penalty of up to £5,000.What will be the effect of EPCs on the market place?

There has been much debate as to whether the energy rating of a commercial property will impact upon the market.

Certainly, a potential buyer/tenant will be in a better bargaining position during sale/lease negotiations if a building is found to have a poor energy rating.

This may well result in a diminution of the sale price or rent. However, it seems unlikely energy efficiency will be the sole determining factor for a prospective buyer or tenant in choosing suitable premises. The likelihood is the state of the market, the condition of the building and its location will continue to dominate a buyer's thinking.

Matthew Grindley is from solicitors Stevensdrake​