KNOWLEDGE

Energy performance certification

MortonFraser_Sally Anthony
Author
Sally Anthony
Professional Support Lawyer
PUBLISHED:
31 March 2015
Audience:
Business
category:
Factsheet

Status:

Different rules already apply.Key facts for the EPC regime as it applies to properties in England and Scotland are set out below.

Rating:

The rating of an English property is likely to be better than that of an identical Scottish property. This is due to different bands or letter ratings being applied to different scores, not to any better energy performance.

Duration:

An EPC for an English property is valid for 10 years - unless relevant alterations are made to the property, in which case a new EPC is required.An EPC for a Scottish property is valid for 10 years, even if any alterations are made after the EPC is issued. It can be updated, to take account of such alterations, but there is no obligation so to update.

Recommendations report:

A report, setting out recommendations for improving the energy performance of the property, must be attached to the EPC for an English property. The report must recommend cost-effective measures that could be carried out either in connection with a major renovation of the building or without a major renovation. There is no legal obligation to implement any of the recommendations.A report must also be attached to the EPC for a Scottish property. It must set out cost effective recommendations for improving the energy performance of the property. From 1 October 2012, the recommendations listed must also be technically feasible. Again, there is no legal obligation to implement any of the recommendations.

Providing a copy EPC to prospective buyers and tenants:

A copy of the EPC for an English property must be provided to any prospective buyers or tenants, including prospective sub tenants and prospective assignees of the tenant's interest in an existing lease. No EPC requires to be provided to an existing tenant in relation to a lease renewal.

A copy of the EPC for a Scottish property must be provided to any prospective buyers or tenants (including sub tenants), but the rules do not require it to be provided to a prospective assignee of the tenant's interest in an existing lease. Again, no EPC requires to be provided to an existing tenant in relation to a lease renewal or extension.

Marketing/advertising material:

For property in England:

  • An EPC (unless already available) must be commissioned before a property is marketed for sale or letting.
  • The seller or landlord must use all reasonable efforts to ensure that the EPC is obtained within 7 days of the property being put on the market – with an absolute deadline of 28 days.
  • Agents acting for the seller or landlord have a statutory obligation to ensure that both of these things are done.
  • The asset rating of the building, as shown on the EPC, must be stated in any advertisement for sale or rental in commercial media (this includes sales or letting particulars).

For property in Scotland:

  • A seller or landlord must be ready to exhibit an EPC within 9 days after any prospective buyer or tenant requests a copy.
  • Any advert (for sale or lease of the property) must include a note of the EPC rating.

No letting of poorly rated properties

For property in England and Wales:

  • In terms of the Energy Act 2011, from 1 April 2018 at the latest, regulations must be in place to prohibit the letting of properties (commercial or residential) which have a poor EPC rating
  • The Regulations have now been published - the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. The prohibition will affect F or G rated properties. For affected properties, there could be valuation and cost implications.
  • The prohibition will endure until certain energy efficiency improvements had been made to the property – even if those did not bring the rating up to E or above. 
  • The rules will, from 1 April 2018, apply to new lettings or lease renewals - unless they are within one of the exceptions. From 2023 the rules will also apply to existing leases, not just new leases or lease renewals.
  • Excepted leases: (1) 6 months or less (unless the tenant has occupied the property for more than a year) and (2) over 99 years and (3) of any properties that are excepted from the need to have an EPC.
  • Landlords do not have to carry out improvements if they are not permissible, appropriate and cost effective. This means that landlords do not have to carry out the improvements if (1) they don't meet the Green Deal "golden rule" or (2) the tenant or a third party consent is required for the works - and such consent has been refused (which is a relief, as regards tenant consent, for existing leases where the drafting is unlikely to cover this issue) or (3) the works would actually reduce the value of the property by 5% or more.
  • Penalties for letting in breach of the rules are (1) if the breach was for less than 3 months at the time of service of the penalty notice, a fine equal to the greater of £5000 and 10% of the rateable value of the property - with a maximum penalty of £50,000 or (2) if the breach was for more than 3 months at the time of service of the penalty notice, a fine equal to the greater of  £10,000 and 20% of the rateable value of the property - with the maximum penalty being £150,000.
  • The regulations also provide difference rules in relation to residential property - which are not covered in this note.

For property in Scotland:

  • In terms of the Energy Act 2011, from 1 April 2015 onwards, the Scottish Government will be entitled (but not obliged) to issue regulations to prohibit the letting of properties (commercial or residential) which have a poor EPC rating.
  • The Scottish Government hope that the regulations to be brought in under S63 of the Climate Change (Scotland) Act 2009, will result in older Scottish buildings being made more energy efficient. 
  • The Scottish Government has indicated that it intends to monitor the position to build up a picture of how and if buildings in Scotland are becoming more energy efficient or not – and this will drive the timetable for any future regulations under the Energy Act.
  • If such regulations are brought in, and if the rating threshold is the same as for England and Wales, then this could result (in practice) in a higher minimum standard being imposed for the energy efficiency of buildings being let in Scotland. This is because the method of calculation of EPC ratings differs between Scotland and England/Wales, such that a building located in Scotland tends to have a lower rating than would apply to the same building if it was located in England or Wales.

Prominent display of EPC in commercial buildings

For property in England:

  • From 9 January 2013, the EPC for certain commercial buildings must be displayed in a prominent position. The rule applies if:-
  • there is already an EPC for the building ie it does not force the obtaining of one if there is none and
  • the building has a total useful floor area of more than 500 sq m (ie 5382 sq ft) and
  • members of the public frequently visit the building.

This new rule is in addition to the existing rule that a Display Energy Certificate must be displayed in certain buildings occupied by public bodies. However, the new rule applies to any commercial building, above the threshold floor area, which is frequently visited by members of the public – and would include  shops, restaurants, hotels, cinemas and banks.

For property in Scotland, the position is the same as for England except that the Scottish regulations:

  • make it clear that the display obligation is imposed on the owner, or if the owner is not the occupier then the obligation is on the occupier;
  • simply refer to a floor area of more then 500 sq m, rather than a “useful” floor area – which could mean that the Scottish regulations will apply to slightly smaller properties than the English regulations;
  • expand on the word “frequently”, by confirming that this means visited by members of the public on at least a weekly basis; and
  • impose the obligation on buildings occupied by a public authority regardless of whether or not there was already an EPC for such buildings ie the regulations will force the obtaining of an EPC for buildings occupied by a public authority which have a floor area of more than 500 sq m (reducing to 250 sq m from 9 July 2015). 

 

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The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers.  Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.