16 Nov 2018
By Stephen Annis, Trainee Solicitor Commercial Property, Blackadders LLP @ComPropStephen
As most owners of commercial properties will be aware, an Energy Performance Certificate (“EPC”) is a document produced by an approved assessor which is designed to provide a measure of a property’s energy efficiency. This will be in the form of a rating, which will be from ‘A’ to ‘G’ on a scale, with a rating of band ‘A’ representing the highest energy efficiency. To calculate this rating an EPC assessor will use a standard methodology, looking to how the property is ‘insulated, heated, ventilated, and lighted’. However, what is not as often understood are the situations in which an EPC is necessary, and what the penalties are for failing to have one in place.
It is necessary to provide an EPC if you are selling your property * or if you are renting your property to a tenant. This requirement to provide an EPC applies to both domestic and non-domestic properties. Additionally, the following requirements will also apply:-
An EPC is also required if you are applying for a completion certificate from the Local Authority for the construction of the building; if you are applying for a feed-in tariff for solar panels; and it is often a request from your lender if you are refinancing your property. An EPC is not required to be given to an existing tenant who is renewing their lease. For domestic properties, a Home Report will usually be required to put the property on the market, which will contain an EPC - it is worth noting that for a private sale, where a Home Report is not needed, an EPC is still required.
Penalties In terms of penalties, failure to provide an EPC to a tenant or purchaser can result in a Penalty Charge Notice - which carries a fine of £500 (for domestic properties) or £1,000 (for commercial properties). It is irrelevant that a tenant or purchaser waives their right to be provided with an EPC. It is also worth noting that Local Authorities have the power to bring criminal sanctions against those who breach EPC legislation.
For some properties, it is mandatory for an EPC to be produced and displayed in the property; for example, in properties that are occupied by a public authority and which are frequented by the public and are over 250m2 in area. Additionally, if you own a non-domestic property over 1000m2 in area, and are planning to sell or let the property, you are under an obligation to have not just an EPC, but also an action plan which identifies improvements to the energy efficiency of the property. We have not explored the full details of that here, but further information can be provided if you require.
Once an EPC is produced for a non-domestic property, it is a legal requirement to have it affixed to the property. Building standards guidance suggests this is best affixed near a boiler or meter. It is also good practice to keep a copy with your title deeds or any alteration documents, as it may be needed in the future. It is worth noting that only the EPC itself requires to be affixed to the property - it is not a breach of this requirement if the recommendation report included with an EPC is not affixed to the property. Penalties for failure to comply with the requirement to display an EPC can result in a fine of £1,000.
How long does it last? An EPC will last for a period of 10 years and does not need to be updated during this time. However, if alterations have been carried out, it may be a good idea to have the EPC updated as these alterations may have increased the property’s energy rating from the original EPC rating.
Exemptions It is also useful to note that there are some categories of property which are exempt from the EPC regulations. These include:-
Does the property already have an EPC? Should you be curious as to whether a property you are considering purchasing or already own has a current EPC, there is an EPC register which contains the EPCs of properties which have been produced. Please note this generally only contains EPCs of non-domestic properties. This register is open to the public and can be accessed by anyone and searched by postcode, as well as the EPC Report Reference Number. It is worth noting that not all EPCs are listed here, due to the fact that lodging the EPCs on this register was phased in over time.
In terms of future developments, it is also worth mentioning that the Scottish Government is currently consulting on legislation to introduce a minimum energy rating for private domestic properties subject to a new lease after 1 April 2019. This will have the result of making all properties leased to a new tenant after this date have a minimum energy rating of a band ‘E’, which requirement is expected to rise to a band ‘D’ after 1 April 2022. This will likely be enforced by Local Authorities who can issue fines to the owners of properties which do not meet the required rating. Should these changes be brought in, they could have a significant impact for many private residential landlords, who will find they cannot grant a new lease of their properties if their energy rating is a band ‘F’ or less without carrying out upgrading works.
Please also be aware that the regulations applying to an EPC will differ for properties which are not located in Scotland.
For help and advice on commercial property related matters please speak to a member of the Blackadders Commercial Property team.