Energy Performance Certificates: An inconvenient truth?
Energy Performance Certificates (EPCs) were the driving force behind the Government’s decision to introduce Home Information Packs and soon commercial properties will need them too.
Buildings account for an estimated 40% of UK Carbon emission so EPCs are seen as vital to reducing the country’s carbon footprint. The Government hopes they will encourage landlords and developers to improve the energy efficiency of their properties. The Government claims those who do so will be rewarded by increased rental values and sale prices. In time EPCs could have a significant impact on the commercial property market.
An EPC records the energy performance of a building by comparing it to other similar structures and includes recommendations for improving efficiency. Each building is given a rating from A (excellent) to G (very poor). An EPC will be valid for 10 years.
From 6 April 2008 an EPC will be needed on the construction, sale or letting of a non-residential building with a floor space of 10,000 square metres or more. This is extended on 1 July to include buildings with 2,500 or more square metres and from 1 October will include all non-residential buildings with a few very narrow exceptions. It is the responsibility of the seller of the building, or landlord on the grant of a lease, to obtain the EPC at their own expense. The obligation to provide an EPC also applies when a tenant sells an existing lease or sublets under an existing lease. The definition of “building” in EPC regulations includes part of a building designed or altered to be used separately. This means a tenant selling a lease of an industrial unit, shop unit or floor in an office may need to provide an EPC.
Landlords could find it difficult to recover the costs of supplying the EPC from tenants through existing service charge provisions and shortages of qualified assessors could lead to delays in obtaining certificates. Therefore, anyone thinking of selling a commercial property in the next 6 months should seek advice as to whether an EPC will be needed and, if necessary, bring the property to market quicker to try and beat the deadline. Those already affected by the regulations should factor in the extra cost and obtain an EPC as soon as possible.
The impact of EPCs on the property market may not become apparent for sometime but so called “green leases” may allow Landlords to benefit from these changes. Leases obliging tenants to reduce energy consumption, and only allow alterations which improve the energy efficiency of the building, could yield higher rents as they are likely to have better EPC ratings. With many businesses striving to reduce their carbon footprint, buildings with high EPC ratings may prove more attractive to tenants. In years to come Landlords letting properties under green leases receive higher rents whilst leading the fight against climate change.
Anyone requiring more information should contact Russell Dowling in the Slee Blackwell Commercial Department on 01271 349933
