Energy Performance Certificates – changes from 6 April 2012

16/02/12

From 6 April 2012 the law on Energy Performance Certificates (EPCs) is changing. These changes are being introduced with the intention that EPCs will be made available at an earlier stage in the sales and lettings process, thereby increasing the role that the energy information plays in a potential buyer or tenant's decision to take the property.

The main changes relate to the point at which the EPC must be produced, a new requirement that the first page of the EPC be attached to property particulars and an imposition of obligations on agents and surveyors.

Background - when is an EPC required?

Since 2007 it has been necessary to produce an EPC whenever a property is constructed, sold or rented out. For multi-let commercial properties it is necessary to produce a separate EPC for each part of the property that has its own heating system; where the building has a shared heating system an EPC can be prepared for the whole building or for each part of the building.

There is no requirement that an EPC be produced for off-plan sales or lettings before construction has been completed. However, once construction has been completed then an EPC is required if the building will have heating in the future, even though the heating system has not yet been installed, and even if it won't have been installed at the point of sale or letting. In this situation the assessment is carried out on a hypothetical basis.

At what stage must an EPC be produced?

Under the current rules an EPC must be provided before entering into a contract to sell or rent out the property or, if sooner, when a prospective buyer or tenant is supplied with written information about the property or views the property. For residential sales the rules are stricter: an EPC must be commissioned before the property can be put on the market.

However, the reality for many commercial property sales and lettings is that the EPC is not produced until exchange of contracts. As the purpose of the EPC is to provide a prospective buyer or tenant with energy information before they make a decision about whether to take the property, the government is concerned that EPCs are being provided too late in the process.

As such, from 6 April, an EPC must be commissioned for all properties before they can be put on the market (whether residential or commercial and whether for sale or rent). The owner must use "all reasonable efforts" to obtain the EPC within seven days of the property being put on the market. If the EPC is not obtained within those seven days the owner has 21 additional days. At the end of this period the owner is in breach of the regulations, and can be penalised accordingly, even if they can demonstrate that they used all reasonable efforts to obtain the EPC.

There are no transitional provisions in place for commercial properties but it would seem that this requirement only applies to properties put on the market on or after 6 April.

What information is required in the property particulars?

The "written particulars" of a property are a written description (including in electronic format) which includes any two of the following:

• A photo of the property (or a room within it)
• A floor plan of the property
• Details as to the size of the rooms
• The measured area of the property
• (For a rental property) the proposed rent

Under the current rules, the written particulars for commercial property are not required to contain any information from the EPC. However, from 6 April it will be necessary to attach a copy of the first page of the EPC (once this has been obtained) to the written sale or letting particulars of all properties. There are no transitional provisions, so it applies to properties already on the market at that date as well as those first placed on the market on or after that date.

One point of concern is that the definition of "written particulars" could easily catch advertisements: property trade publications are full of property advertisements including photos, measured areas and proposed rents. It is hard to believe that the intention is to require the first page of the EPC for each of these properties to be attached to the publications, but those placing adverts should be aware that this is technically what the legislation requires.

Who is responsible for obtaining and supplying the EPC?

At the moment only the owner of commercial property has any liability with regards to the commissioning and provision of the EPC. Agents and surveyors can take their client's word for the fact that an EPC has been commissioned and have no liability if it is not produced. However, this will change from 6 April.

Any person acting on behalf of the property owner is under an obligation to check that the EPC has been commissioned before marketing the property. Enforcement officers are able to require that agents produce a copy of the EPC on request, so it's essential that the agent has evidence of this before marketing begins. Agents are also under an obligation to use reasonable efforts to secure the EPC within the same time limits as the owner, and will therefore be in breach of the regulations to the same extent if the EPC is not obtained.

Once the EPC has been obtained, agents must ensure that the EPC is attached to the written particulars, as outlined above. Liability for failure to include the first page of the EPC lies with the person who gives the particulars to the potential buyer or tenant, and this will often be the agent. Where an agent is placing an advert under its own name and the EPC first page is not supplied, it will be the agent who is liable for this failure.

Air conditioning inspection reports

One further change relates to air-conditioning inspect reports. At the moment it is possible, but not compulsory, to lodge air-conditioning inspection reports in the Landmark central government register. However, any air-conditioning inspection reports produced on or after 6 April will need to be lodged: further information on how this will work in practice is expected in advance.

Property owners should also be aware that proposals are in place to introduce an air-conditioning quality assurance framework, as there is for EPCs.

Summary

From 6 April 2012:

• EPCs must be commissioned before a property is put on the market. There is no defence to a failure to obtain the EPC within 28 days from the date that the property is first marketed: this is a breach of the regulations and the person in breach can be penalised, even if it can be shown that all reasonable efforts were made to obtain it.
• The first page of the EPC must be attached to all written particulars. This arguably extends to advertisements, though it is not clear how this would be achieved. Failure to do so is a breach by the person supplying the particulars.
• Where agents are instructed to market a property on behalf of the client they can be held liable for failure to comply with these requirements. Agents should therefore be cautious about marketing a property before the EPC has been obtained.
• All air-conditioning inspection reports must be lodged at the Landmark central register.

Further information

If you require any further guidance about the issues raised in this note please get in touch with your usual contact at BrookStreet des Roches, or contact any of the solicitors in our real estate team.