It is now only six months until the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 will commence their impact on buildings which are non-dwellings in England and Wales. The property industry has had a timely reminder of this imminent change with the discussions of Energy Performance Certificates (EPCs) in relation to dwellings and Home Information Packs (HIPs). August 2007 saw the arrival of HIPs for properties with four or more bedrooms and September 2007 saw the extension of this to three bedroomed properties. The phasing in of HIPs is ongoing and the requirement for EPCs for dwellings is already a requirement and for non-dwellings is timetabled.

The Impact of the Regulations for Commercial Premises

The impact will affect commercial premises in three ways:-

  • By 6 April 2008, EPCs will be required on the construction of all "non-dwellings". They are also required for the sale or renting out of non-dwellings with a usable floor area over 500 square metres and this then extends to all buildings that are non-dwellings by 10 October 2008, subject to a small number of exceptions.
  • The regulations also introduce from the same date, an obligation for Display Energy Certificates (DECs) for a category of building generically called public buildings. These are buildings with a usable floor area in excess of 1,000 square metres occupied by public authorities and other institutions providing public services to a large number of people, where the public regularly enter the building.
  • Finally, the regulations set out provisions relating to the inspection of air conditioning systems and the effective dates are 4 January 2009 for systems with an output in excess of 250kW and 4 January 2011 for those with a output in excess of 12kW. The energy assessors certifying the performance must be accredited and they have an obligation to register the findings in a central register.

EPCs

An EPC is a certificate of the rating of the energy efficiency of a building and also records the environmental impact of that building from carbon emissions. The regulations require the certificate to be produced to a potential purchaser or tenant at the time of providing initial information about the building; at the time a potential purchaser or tenant is viewing the building or at the time of exchange of contracts, whichever is the earlier.

It is clear that the regulations will apply to mostly all buildings that are non-dwellings in time and this will include parts of buildings. The named exceptions include small non-residential buildings with a floor area of less than 50 square metres, places of worship and buildings of a temporary nature and intended for short term use (two years or less), industrial sites, workshops and non-residential agricultural buildings with "a low energy demand".

The main concerns include the costs associated with the new regulations and also the expenditure of time. The EPC will only have a limited life value and although the EC Directive suggests ten years, the UK Government is suggesting twelve months for a certificate to still be valid at the point of sale or letting. There is also likely to be discussion between landlords and tenants as to whether or not the costs of providing EPCs will be stipulated as a monetary obligation of the tenant in a lease, whether it forms part of the service charge or whether it is a matter to be excluded from the service charge and wholly met by the landlord. In the case of a sale of property it may be that the practice follows that of the residential market whereby it is the seller who is obliged to produce the EPC to the potential purchaser. As regards the time impact, it is estimated that it will take twelve to fourteen days to produce an Energy Performance Certificate and it is also widely known that there is currently a shortage of energy assessors and further delays may incurred in securing the services of an assessor in the first place.

DECs

The list of buildings which appear to be captured by the DEC requirement under the banner of public authorities include central or local government offices, NHS Trusts, places of education, the police, courts and prisons and institutions providing public services including museums, art galleries and swimming pools. It is envisaged that the regulations should not impact on hotels and retail outlets. These buildings require to display their Energy Certificate in a prominent place and this should include (1) a note of the asset rating detailing the energy performance of the building and its services and (2) the operational rating of the building based on actual statistics of the previous few years, if available. The intention is for the general public to be able to compare the energy performance of public buildings and also to promote improving energy use.

As in the case of EPCs, the DEC inspection reports will include a list of recommendations for increased energy efficiency. The recommendations will range from low cost improvements to wholesale replacements of particular systems if required.

Inspection of Air-Conditioning Systems

The time of first reports must comply with the time limits in the Regulations as mentioned above. The reports are valid for seven years and again will include a list of recommendations of repair or replacement to improve the overall energy efficiency of the system. The intention is to provide an assessment of the efficiency of the system and the size compared to the cooling requirements. Again, the assessors require to be accredited.

Conclusion

The regulations have been introduced to comply with the European Parliament and Council Directive from 2002. This is part of an overall programme to control the impact of climate change particularly given the high carbon emission from buildings. It is an essential part of the control of this major contributor for global warming for the future. This first stage of regulations deals with reporting and recommendations and no system of penalties for poor energy performance is in keeping with the increase in number of organisations with corporate and social responsibility who are making the protection of the environment a priority as part of their strategy. Although there are no sanctions for buildings which are of an inefficient rating, it is anticipated that the marketplace may determine some penalty as buildings with a better energy efficiency rating may be selected above those falling below recommended standards.

It is anticipated that the Government will require to provide financial incentives to assist in the exercise of working towards improving the performance of efficiency of buildings and it may be that there is an increase in grants for homeowners and commercial enterprises. It has also been suggested that there may be preferential interest rates for energy efficient buildings from lenders and in addition, some local authorities in England have piloted schemes whereby there are council tax rebates.

There are concerns that the regulations may capture transactions such as inter group transfers as well as transfers of any level of leasehold interest. In addition in the case of a multi-occupancy building, if one tenant is making a transfer of interest in the building, the whole of the building will be assessed for the purposes of the EPC.

Some larger commercial organisations are preparing in advance for the introduction by engaging energy assessors who specialise in the larger commercial sector now, to ensure that they are in a position to comply with the regulations at the commencement date. This, however, may not be possible for many small or middle sized commercial organisations who would also be affected by the need for currency of an EPC.

There are still ongoing discussions between the Government and the commercial property sector prior to the commencement of the regulations. The question therefore arises, not only is the industry ready for the regulations, but is the Government ready for the performance review? It is widely known that the ongoing consultations will take time and the guidance and training of sufficient number of assessors is also behind schedule. That said, EPCs are coming and much needed for all our futures.

Across the Border

Many of the same issues will apply to the introduction of EPCs in Scotland, which is being coordinated by the Scottish Building Standards Agency. However they have adopted a slightly different approach to the structure and introduction of EPCs. For details of the approach being taken in Scotland and the timetable for introduction see the article in this edition of Open Door -Certifying Energy Performance of Buildings – the view from Scotland.