Buildings account for 40% of carbon dioxide emissions in the UK. The aims behind Energy Performance Certificates (EPCs) and the related Display Energy Certificates (DECs) are to reduce carbon emissions, tackle climate change and meet EU requirements.

The introduction of EPCs for commercial buildings is phased, but they will be required on the construction, sale or rent of all commercial buildings by 1 October 2008.

EPCs show a building's energy efficiency rating on a scale of A-G and will need to be available to prospective buyers and tenants. The impact of EPCs cannot be ignored in a world where environmental issues are increasingly important to clients: businesses and individuals alike.

So what does this mean? To find out more read the analysis compiled by Wragge & Co's real estate experts.

Why require the certificates?

The Government has to comply with EU requirements imposed by the Energy Performance of Buildings Directive (2002/91/EC).

When does it come into force?

  • The implementation is to occur in various stages in order to meet the EU deadline of 4 January 2009.
  • EPCs will be required on the construction, sale or rental of commercial buildings as follows:
    • 6 April 2008 – buildings over 10,000 m².
    • 1 July 2008 – buildings over 2,500 m².
    • 1 October 2008 – all other buildings.

Lease renewals and surrenders are excluded. 

  • Requirements for Energy Performance Certificates (EPCs) apply to units as well as whole buildings. For multi-occupied buildings sharing a common heating system, it may be permissible to have one EPC for the whole building. Alternatively, EPCs for individual units may be based on the assessment of a representative unit in the block. Find out how it is anticipated that this will work in practice.
  • Conversion of existing buildings into a greater or fewer number of units could trigger the requirement for an EPC, when accompanied by changes to the heating or ventilation systems.
  • Display Energy Certificates (DECs) are required by 1 October 2008 in buildings with a gross internal area of over 1000 m² that are occupied by public authorities and by institutions providing public services to a large number of persons where the public frequently visit the building. This is designed to cover services traditionally associated with local or national government e.g. museums and swimming pools but not shopping centres or hotels.

Are there any buildings which do not need an EPC?

EPCs are not required for the following types of building:

  • Places of worship.
  • Temporary buildings with a planned time of use of two years or less.
  • Industrial sites, workshops and non-residential agricultural buildings with low energy demand.
  • Standalone buildings with a gross internal area of less than 50 m² (excluding dwellings).
  • Buildings which are to be demolished (conditions apply).

What must the certificate contain?

EPC

  • An EPC contains information about the energy efficiency of a building as an asset.
  • EPCs must include certain information, e.g.:
    • The asset rating of the building (how efficient it is on an A-G scale).
    • A reference value or benchmark from which to judge efficiency.
    • Reference number under which the EPC is registered.
    • Name of the energy assessor and accreditation details.
    • Date the EPC was issued.
  • It must be accompanied by a report recommending improvements to the energy performance of the building, with indicative paybacks.

DEC

  • A DEC must contain similar information to an EPC but it also shows an operational rating. This is an indication of the amount of energy that the building has consumed over a period of 12 months. In time, the operational rating for the previous two years must also be displayed, so a comparison of the amount of energy consumed can be made.

How long are the certificates valid?

  • EPCs are valid for up to ten years unless there have been major works at the property (see when does it come into force?).
  • DECs have to be issued annually.
  • EPCs, DECs and the related recommendation reports must be registered; responsibility for this lies with the energy assessor who issued the EPC/DEC.

Who is responsible for obtaining the certificates?

  • Contractor – must issue it to the owner of new-build property within five days of completion of the works if it has not already been issued under building regulations. Seller – must make the EPC available to any prospective purchaser at the earliest opportunity. This is likely to be with any sales particulars, but in any event must be provided before contracts are exchanged.
  • Landlord (or on a sub-letting the intermediate landlord) – must make the EPC available to any prospective occupier, again at the earliest opportunity.
  • In each case, the EPC must be provided free of charge.
  • The public authority (or institution providing public services) must display its DEC in a prominent position.
  • In addition, there is a duty on anyone with an interest in, or in occupation of, the building to co-operate with a person who is under a duty to provide an EPC or DEC regarding access etc.

Who pays for the certificates?

  • In a landlord and tenant situation it may be possible to recoup the cost of producing a certificate via the service charge if the reason for issue is to comply with legislation. Clear wording will be required in the lease and it is likely that many tenants will argue against this recovery. Landlords who choose to obtain EPCs before they are required by law to do so should be aware that the expenditure may well be irrecoverable.
  • Recommendations made to improve energy efficiency are currently just that. The landlord will not be required to improve efficiency. Therefore, should the landlord decide to implement recommendations and recover the cost through the service charge, it would have to demonstrate the benefit of the work to the tenants. At the end of the term, it is unlikely that the cost of implementing recommendations can be recovered as dilapidations.
  • There is an argument that obtaining EPCs and improving energy efficiency will be an investment, enabling the landlord to achieve a higher rent due to the lower running costs of the building and potentially increasing its attractiveness to certain classes of tenant.

What else?

  • Air conditioning assessments are also required every five years.

How will the requirement be enforced?

  • Enforcement will be through Trading Standards officers issuing penalty charges notices to those who fail to comply.
  • Penalties vary but the maximum is £5000.

What should be done to prepare?

The information which the energy assessor will need includes up to date plans of the building showing the uses of each area. Information about glazing, heating and ventilation systems will also be required and should be gathered in advance.

Further information

Further information can be obtained from the Department for Communities and Local Government website. Read a copy of the guidance to the regulations, which provides further detail on the matters covered in this analysis.

DECs

The Department for Communities and Local Government has issued two flowcharts illustrating the circumstances in which an occupier will need to display a DEC.

Energy Assessors

The Government has announced that energy assessors can be found using http://www.ndepcregister.com/, although this will not be live until a pilot commences at the beginning of March. There are three levels of qualification for assessors of commercial buildings, depending on the size and complexity of the building. Each assessor must belong to an accreditation scheme – a number of these have been accredited by the government.

Methods of assessment

The method of assessment varies according to whether a building is used as a dwelling or for commercial use, and on the complexity of the building being assessed. For commercial buildings, either SBEM (Simplified Building Energy Model) or DSM (Dynamic Simulation Model) will be used. For more information, see http://www.ncm.bre.co.uk/.