On 6 April 2012 the Energy Performance of Buildings (Certificates and Inspections)(England and Wales) (Amendment) Regulations 2011 (the “2011 Regulations”) came into force. These Regulations alter the rules relating to the need to provide an Energy Performance Certificate (“EPC”) in both commercial and residential property transactions.

Since 2007, it has been a requirement that a property owner must provide an up to date EPC to their prospective buyer or tenant. However, the government is concerned that the EPC is not being delivered in good time to allow the buyer or tenant to make a judgment regarding the property’s energy efficiency status.

In view of this, three main  changes have been brought in by the 2011 Regulations:

1.       An EPC must be commissioned before the property is put on the market, and the owner must use all reasonable efforts to ensure that the EPC is obtained within 7 days of the property being put on the market. After that point, there is an additional 21 day grace period to obtain the EPC, after which the owner is in breach of the 2011 Regulations and may have to pay a penalty.

      NB: This new rule is expressly stated not to apply to residential properties placed on the market prior to 6 April 2012, but it is not clear as yet how it will apply to commercial properties.

2.       The first page of the EPC must be included in the written particulars for both residential and commercial properties, where previously this only applied to residential transactions.

3.       There is an additional duty placed upon the property owner to provide a full version of the EPC as soon as the property is put on the market. This amends the current regulations, to ensure that provision of the full EPC cannot be delayed until just before the exchange of contracts.

It should also be noted that any agent acting on behalf of the property owner will be bound by the 2011 Regulations. An agent marketing the property will be under a duty to ensure that an EPC has been commissioned before the property is put on the market and will therefore be liable for any breach.

In addition to the amendments brought in by the 2011 Regulations, the importance of the EPC is also highlighted by the provisions of the Energy Act 2011 (the “Energy Act”) which will make it unlawful to let commercial properties with an energy performance certificate (“EPC”) rating of E or below from 2018 onwards. It is suggested by GVA that around 20% of the total UK commercial property stock will soon fall within this bracket unless rapid action is taken to improve the environmental performance of properties.

The provisions of both the Energy Act and the 2011 Regulations are part of the government’s strategy to increase the focus on the energy efficiency of commercial buildings in the UK. The target that has been set is for all new commercial properties to be zero carbon by 2019. Various schemes are being developed in order to achieve this, such as tax incentivisation schemes and the Green Deal, which will provide finance packages to enable property owners to pay for necessary energy efficiency works over a period of time.

Property owners should act now to ensure that they will be in compliance with these new pieces of legislation. Obtaining an EPC must now be an essential pre-requisite for any property owner considering marketing their property, in order to avoid the potential penalty for breach. To save future losses, property owners would also be wise to identify now which of their properties need updating, and put in place a strategy of improvement to take place over the next 6 years. Failure to do so could result in a property owner’s entire portfolio being un-marketable by 2018.

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