EPC'S .... Tough New Rules

01 January 2012

Government proposals to prohibit the leasing of inefficient properties by April 2018 in England and Wales (E&W) will force property owners to refurbish energy-inefficient properties in order to prevent these buildings becoming obsolete. Following this, there will be a ban affecting the letting of commercial & domestic buildings with the lowest standards of Energy Performance Certificates (EPCs). This proposal has not reached Northern Ireland yet, but it is believed that the N.I. Assembly will follow suit. Currently Northern Irish landlords fall under the remit of the EU Directive 2010/31/EU and Energy Performance of Buildings (EPB Regulations) legislation. The Department of Finance and Personnel has advised that the legislation EPBD2 will be in force by July 2012.

EPCs assess the energy performance of buildings. The certificates grade the energy efficiency of a building on a scale of A to G with the calculation based on the asset rating of the structure of the building. An EPC is valid for 10 years and comes with recommendations relating to improving the energy efficiency of a building and the rating achievable. The EPC will fully inform any potential tenants of the likely utility bills and running costs for a property and enable them to consider cost savings if the EPC recommendations are carried out. These tough new rules were included in the Energy Act 2011 published late last year. It is believed that approximately 18% of all commercial properties will become unlettable if they are not refurbished in order to improve EPC ratings by 2018.

Where landlords or property owners fail to provide an EPC to any potential tenant or buyer, they will be subject to enforcement action from Local Council Building Control. Non-compliance may result in a penalty charge fine, which for commercial premises could be between £500 and £5,000!
Building Control officers have the power to request proof from agents that the EPC has been ordered and to view the actual EPC seven days after marketing has begun. There have been few concessions, but further guidance can be found by contacting your local Building Control office or free phone 0800 022 3004. EPBD2 will include the requirement for agents, both sales and lettings, to attach an EPC report to all particulars. In fact, only the first page of the EPC will now have to be attached.

This legalisation will be introduced by the Government and may be viewed on the website when it is issued for consultation early in 2012. There is, however, a positive side to having energy efficient buildings as an EPC provides a better understanding of the property’s energy consumption and can help to secure tenants for energy efficient properties. It also indicates to a prospective buyer or tenant how energy efficient the premises are whilst providing information that can help to reduce the running costs of the property. This information could be used to landlords’ or sellers’ advantage by utilising the EPC as a marketing tool for those more energy efficient properties.

In summary, if landlords do not invest in measures to enhance the EPC ratings of properties, the value of non-compliant buildings or poorly performing buildings may be wiped out by 2018. To take this legislation to its ultimate conclusion, even if properties are not for sale, landlords need to instruct EPC’s for their properties prior to 2018 in order to gauge what level of investment is required so that they can take measures to improve EPC ratings and maintain the value of their investment.

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