- The law on Energy Performance Certificates (EPCs) and air-conditioning inspections is changing from 6 April 2012
- An EPC will have to be commissioned before a commercial or residential property is put on the market for sale or let
- Written sales or letting particulars will usually need to contain the first page of the property's EPC
- Air-conditioning inspection reports will need to be lodged on the government register
The legislation which governs EPCs, Display Energy Certificates (DECs) and air-conditioning inspections is changing. In December 2010 we reported on the outcome of a government consultation: "Making better use of Energy Performance Certificates and data". Regulations have now been passed and will come into force on 6 April 2012. We outline below the main changes, and review what these will mean in practice for property sellers, landlords, and other parties involved in the conveyancing process.
Time for production of an EPC
Under the current rules, an EPC in connection with a sale or a letting has to be made available "at the earliest opportunity". The legislation goes on to provide that, in any event, an EPC must be made available before entering into a contract to sell or let the building or, if sooner, on whichever is the earlier of the following:
- the provision of written information to a person who requests information about the building;
- a viewing of the building by the prospective buyer or tenant.
These rules have applied to both commercial and residential properties, since the original regulations were enacted in 2007. However, following the abolition of Home Information Packs (HIPs) in May 2010 (one component of which was an EPC), the provisions from the HIPs regime regarding EPCs for residential properties were carried over into the regulations.
As a result, the legislation currently specifically requires, in relation to residential property, that an EPC should be commissioned before the property is put on the market (unless an EPC is already available). The seller then has to use all reasonable efforts to secure that it is obtained within 28 days of the property being put on the market.
The government is concerned that too many sellers and landlords are not providing an EPC at a sufficiently early stage in the conveyancing process, and are deferring it until exchange of contracts. Taking the residential rule as its model, the government has tightened up the timescales even further. From 6 April 2012, therefore:
- A property owner wishing to sell or let its building must commission an EPC before the property is put on the market, unless a valid EPC is already available. This will be the case whether the property is residential or commercial
- The owner must use "all reasonable efforts" to secure that the EPC is then actually obtained within seven days of the property being put on the market
- If the EPC is not available within those seven days, the owner has a further 21 days in which to obtain it. This is an absolute deadline. In other words, even if the owner has made all reasonable efforts to get the EPC within this extended timeframe, it will still be in breach of the regulations if it is not available.
The current provision about the EPC being available in any event before exchange of contracts will be removed, to reflect the fact that the EPC should be provided some considerable time before this stage. The Explanatory Memorandum states that the average time for obtaining an EPC is 3.3 days. However, the time-frame for the assessment of a complex commercial property may clearly differ from that for a residential flat in a block.
A property is "put on the market" when the fact that it is (or may become) available for sale or rent is, with the intention of marketing the building, first made public in England and Wales by or on behalf of the seller/landlord. It will be made public when it is advertised or otherwise communicated to the public (or a section of the public).
An EPC will only be "commissioned" for the purposes of the new rules if:
- a request is made to an energy assessor who is accredited to produce EPCs for the relevant category of building; and
- the request contains all the information which is necessary to obtain the certificate, including payment (or an undertaking to make payment).
As set out above, the effect of the latest amendments to the regulations will be that a seller or landlord must produce an EPC - at the very latest - within 28 days of the property being put on the market. After dealing with the initial duty to use reasonable efforts to secure an EPC within seven days, the Explanatory Memorandum goes on to state that "There is not a defence of using reasonable efforts after the further period of 21 days has expired".
It should not be overlooked, however, that the duty to make an EPC available to a prospective buyer or tenant may arise sooner than that (see Time for production of an EPC, above).
Notwithstanding this, regulation 42(1) of the original regulations provides that a seller or landlord will not be liable to a penalty charge notice for breach of this obligation to make an EPC available where they request a certificate at least 14 days before the "relevant time", and despite all reasonable efforts and enquiries, it is still not available. Regulation 42(1) does not apply to sellers of residential properties, but they are similarly protected under regulation 42(1A) provided that they commission an EPC before marketing commences.
The "relevant time" is the time for an EPC to be made available to a prospective buyer or tenant (so, at the earliest possible opportunity, but no later than the time at which written particulars are given to a prospective buyer or tenant or they view the building).
Regulation 42(1A) is now to be amended so that it applies to sellers and landlords of both residential and commercial properties. In other words, provided that a seller or landlord has commissioned an EPC prior to marketing, and has used all reasonable efforts to get the EPC, no penalty charge notice can be served simply because the EPC is not available before written particulars are given/the property is shown to a prospective buyer/tenant.
There is a small advantage to sellers and landlords of commercial property of being able, from 6 April, to use regulation 42(1A) as opposed to 42(1). This is because of the differences in timing of when the EPC has to have been commissioned in order for the defence to be available. Reg. 42(1A) only requires that the EPC be commissioned before marketing. In order to take advantage of regulation 42(1), on the other hand, the EPC must have been requested at least 14 days before it was needed. So where a seller commissions an EPC the day before a property is put on the market and then shows a prospective buyer round a week later, before the EPC has been obtained, he may now have a defence under 42(1A) where he would not have done previously under reg. 42. Once the amendments to regulation 42(1A) are in force, regulation 42(1) is only likely to be applicable in relation to properties which are sold or let without being put on the market, or in relation to a letting to a tenant who is relocating in an emergency.
Sellers and landlords must not be complacent because of the existence of a potential defence. Although the legislation does not say so in so many words, use of the defence is effectively curtailed to the first 28 days in which a property is on the market. This is because, even though a seller/landlord may have a defence in relation to a failure to make an EPC available to a prospective buyer/tenant after that time (e.g. on a viewing), as outlined above, there is no defence to the absolute obligation to obtain an EPC within 28 days of marketing. Such a seller may still therefore be liable to a penalty for non-compliance with the legislation.
Information to be contained in property particulars
As originally enacted, the regulations required written particulars of residential property which was marketed for sale to include either the asset rating from the EPC, or a copy of the EPC itself. The regulations were amended in 2010 so that this only applied once a valid EPC had been obtained for the property.
From 6 April 2012, it will be necessary to attach a copy of the first page of an EPC (but not necessarily the whole EPC) to written particulars for the sale or letting of any property - residential or commercial. The obligation will technically only apply once a valid EPC has been obtained, but see comments above and below as to whether it is advisable to start marketing a property before the EPC has been obtained.
The term "written particulars" is specifically defined, and the definition varies depending on whether the transaction is a sale or a letting (see box below). It is important to note however that it can include making particulars available electronically. It may also catch some property advertisements (e.g. in trade press), depending on the level of detail included in such ads (see below).
"Written particulars" means a written description of the property which includes at least two of the following:
- a photograph of the building (or any room in the building);
- a floor plan of the building; the size of rooms;
- the measured area of the building;
- (in the case of a property which is to let only) the proposed rent.
Where the address of the property has been omitted from the particulars, it is permissible to also omit the address from the copy of the front page of the EPC which is attached to them.
The Explanatory Memorandum states that the requirement to attach the first page of the EPC (as opposed to merely giving the asset rating) "will make it more likely that potential buyers and tenants see the recommendations attached to the EPC". However, in most EPCs, the recommendations are to be found several pages in.
This requirement under regulation 6 to attach a copy of just the first page of the EPC to "written particulars" about a property should be contrasted with the duty of a seller or landlord under regulation 5. This regulation requires the seller/landlord to make a copy of the (entire) EPC available to a prospective buyer or tenant when responding to a request from such a person for information in writing about the property.
It would appear that regulation 6 is intended to apply at an earlier stage in the marketing process than regulation 5, and could therefore, as mentioned above, extend to property advertisements which meet the requirements for "written particulars". While this could theoretically be the case at the moment in relation to advertisements for residential properties (e.g. in local newspapers), the definition of "written particulars" as it stands at present (before the amendments) is unlikely to catch very many of these sorts of ads. This is because residential adverts do not tend to include room sizes, whereas advertisements for commercial properties will usually include the measured area of the building.
The obligation to include the first page of the EPC with written particulars only applies once the EPC has been obtained. Those placing advertisements may not however have much control over (i) exactly when the ad is published and (ii) when the EPC is issued.
The final point to note in relation to including energy performance data in marketing information is that in March 2010 the previous government published a consultation: "Making better use of Energy Performance Certificates and data". This contained a proposal that advertisements for both residential and commercial property should contain the property's asset rating - something which also forms part of the recast European Directive on energy performance of buildings.
However, in the coalition's response to this consultation in November 2010, it stated that "This Government will not be taking this proposal forward at this stage because this requirement is not due to be implemented until July 2013 and to implement it any earlier would amount to gold plating". For the reasons set out above however, it may in fact be necessary to include the asset rating (via the first page of the EPC) in certain property advertisements from April 2012.
Liability of agents marketing properties
Agents acting for sellers and landlords also need to take note of the new regulations. Under the current provisions, an estate agent must be satisfied that an EPC has been commissioned for a residential property before marketing it for sale. Such an agent is also under a duty to use all reasonable efforts to secure that the EPC is obtained within 28 days.
The new provisions are more onerous for agents. Agents and surveyors now need to check whether an EPC has been commissioned before marketing any building - residential or commercial. The rule has also been extended to cover lettings as well as sales. Enforcement officers may require an agent to produce a copy of the request for the EPC, so those acting for sellers and landlords will not have the option of simply taking their clients' word for the fact that an EPC has been commissioned.
The same rules apply to agents, in relation to the timing for production of the EPC, as apply to sellers and landlords themselves. In other words, the agent has to use all reasonable efforts to secure that a valid EPC is obtained within seven days of the property being put on the market. If it is not available by then, the agent must secure that it is obtained within a further 21 days. Query does this duty extend to paying for the EPC on behalf of the client...?
It is not clear whether taking the property off the market, pending the EPC being made available, would be a sufficient defence. Agents may therefore consider that the only safe course of action is to refuse to market the property until the EPC has been obtained.
Agents acting on sales of residential property are already under a duty to ensure that at least the asset rating of the property is included in the particulars, when giving out written particulars to prospective buyers or publishing them on their website. From 6 April 2012, agents and surveyors acting on sales and lettings of all types of property will need to ensure that the property particulars contain the relevant information as outlined in the previous section "Information to be contained in property particulars" above.
Particular care may need to be taken when placing property advertisements in the press. Liability for failure to include the first page of an EPC with "written particulars" rests with the person who is "giving" the particulars to persons who may be interested in buying or renting the building. Where an advert is issued under the surveyor's name, this may be sufficient to attract liability for the surveyor (and query, for the publication in which the advert is placed...?).
Liability for other professional advisers?
The regulations refer simply to "a person acting on behalf of" the seller or landlord. In certain contexts, this may not necessarily be confined to agents and surveyors. It is difficult to see on the face of the regulations what would prevent other professional advisers, such as solicitors, being liable if, for example, an EPC is not obtained within 28 days of marketing.
It remains to be seen what (if any) further guidance will be issued to enforcement officers on this point, although it is to be noted that this possibility already exists for those acting for sellers of residential properties. In many cases solicitors will not be instructed until the property has been marketed and a buyer or tenant has been found. Where this is more than 28 days after first marketing, the solicitor is unlikely to be "acting" at the time in question.
Nonetheless, professionals advising sellers and landlords would do well to remind their clients of the need to comply with their legal obligations, and enquire whether this has been done.
Air-conditioning inspection reports
Energy Performance Certificates have to be lodged in a central government register. The register is maintained by Landmark. While it is currently possible to lodge an air-conditioning inspection report on the register, it is not mandatory. This will change from 6 April 2012 and air-conditioning reports produced after that date will need to be lodged. The Explanatory Memorandum states that this will enable the government to assess the quality of inspection reports and monitor compliance with the regulations.
The Department for Communities and Local Government plans to issue instructions about the lodgement of air-conditioning reports, and update its existing guidance on air-conditioning inspections, as well as publish guidance on the compliance and enforcement provisions before 6 April 2012.
The Explanatory Memorandum states that proposals are also in place to introduce an air-conditioning quality assurance framework, as there is for EPCs and DECs. For more information about air-conditioning inspections, including a link to the guidance mentioned above, see our earlier alerts:
There are specific transitional provisions in the regulations relating to residential properties. These provide that the current regulations will continue to have effect in relation to a residential property put on the market before the new regulations come into force. There is no similar provision in relation to commercial properties; however it would seem that the requirement to commission an EPC before a property is put on the market, and thereafter to obtain it within 28 days, only applies to commercial properties which are put on the market on or after 6 April 2012.
There are no transitional provisions in relation to the obligation to include the first page of an EPC with property particulars. This should therefore be added to any particulars which are supplied to prospective buyers and tenants on or after 6 April - even if the property was already on the market prior to that.
The requirement to lodge air-conditioning inspection reports on the register would only appear to apply to reports issued on or after 6 April. However, it should be possible to voluntarily lodge pre-existing reports.
Things to consider
Arguably, the new regulations do not change anything in relation to the timing of when an EPC has to be made available. It has always been the case that an EPC should be available to be supplied with written particulars, or on a viewing of the property. Since a request for such particulars or a viewing could come immediately after the property is put on the market, the only safe course is for a seller or landlord to ensure that the EPC is not just commissioned, but actually obtained, before the property is put onto the market.
Property owners should not be lulled into a false sense of security by the availability of a possible defence for breach of one of the regulations. There is no defence to a failure to obtain an EPC within 28 days of first marketing. Best practice must be to commission an EPC well in advance of the property being put on the market and to ensure that it is obtained before marketing commences.
Where an EPC is not yet available before the property is put on the market, property owners - and their agents - should ensure that they follow up to ensure that it is obtained as soon as possible, and in any event within 28 days of the property being put on the market. As soon as the EPC has been obtained, written particulars for the building should be updated to include a copy of the first page.
See also the next article below on the Energy Act, which contains provisions relevant to Energy Performance Certificates and the keeping of the register.