Q. My agents have told me that they will not market my property until I have produced an EPC. Why is this? I thought that we didn’t need an EPC until exchange of contracts!
A. There has been a misconception that an EPC is not required until exchange of contracts (or completion) and market practice has often been for an EPC to be provided during the due diligence phase of a transaction. However, this has never actually been lawful. The current obligation is to make an EPC available to a prospective buyer or tenant at the earliest opportunity, and in any event by no later than the earlier of: the date on which written particulars are issued; the date on which a viewing takes place; or exchange of contract (or completion if there is no exchange).
To counteract current practice, the Government has introduced some changes to the law, which will take effect early next year. Importantly, the ability to provide an EPC as late as exchange of contracts is being removed (as the Government believes that it is this drafting in the legislation that has caused the confusion). This means that an EPC would have to be provided at the earliest opportunity and on the later of a viewing taking place or written particulars being issued.
The time limits within which an EPC must be provided when the property is marketed will also change. The current 28 day period will reduce to seven days. Further, an EPC must be physically attached to any written particulars that are issued in relation to the property, not merely “made available” at that time. This means that agents will not lawfully be able to issue written particulars that do not include an EPC within them. This is already the case for residential properties, but is now being extended to non-residential properties as well. The agent can be directly liable for a failure to comply with this obligation. You will not be able to escape the changes by putting your property on the market before they are implemented if written particulars are issued after implementation.
The Government wants EPCs to be used by prospective buyers and tenants to compare buildings and decide which one to buy/let, which is not presently the case, as EPCs are often not provided until exchange of contracts (by which time it is too late). The Government hopes that buildings with a low energy performance will become unpopular so owners will be incentivised to improve the energy efficiency of them.
Q. I’ve heard that a new Construction Act comes into force on 1 October. What do I need to do?
A. This is not a brand new Act, but some of the requirements for payment and adjudication in the Housing Grants, Construction and Regeneration Act 1996 have been updated. These apply to construction contracts entered into on or after 1 October 2011 for construction works in England and Wales and 1 November 2011 for construction works in Scotland. Therefore, any construction contracts you enter into on or after these dates will need to include provisions which comply with the revised Act. If they do not, terms and time periods will be implied into your contracts that might be detrimental to your interests.
You should therefore familiarise yourself with the new regime, particularly the new terminology and the timing and service of payment notices. It is imperative that payment notices are dealt with promptly. Payment and pay less notices should include clear breakdowns of how sums due have been calculated and need to be issued even if the sum due is zero. If unpaid parties remain unpaid, they will have an enhanced right to suspend and may down tools more readily than at present.
You should also check that your contracts contain the following:
- a mechanism for determining the date on which payments fall due (which can’t be triggered by a payer serving a notice on the unpaid party) and the final date for payment;
- provisions relating to pay less notices, which replace withholding notices;
- nine compulsory requirements in relation to adjudication, including a new slip rule designed to correct small mistakes in adjudicator’s awards;
- a clause dealing with the Act’s approach to payment when the unpaid party is insolvent; and
- updated statutory references.
Note that the new Act applies to oral construction contracts so make sure your construction agreements are recorded in writing and that pre-contract conversations are carefully noted and marked “subject to contract”.
You should avoid clauses which allocate the costs of adjudication between the parties. Any pay-when-certified clauses also need to be removed, because in most construction contracts, they join the ban on pay-when-paid clauses contained in the original Act.
Finally, look out for amended standard form construction contracts which deal with all the upcoming changes.