Energy Performance Certificates - transitional provisions published

Energy Performance Certificates (EPCs) will be compulsory on the construction, sale or letting of commercial buildings of more than 10,000 square metres on or after 6 April 2008. Please see our earlier Alert, issued in January 2008.

Where a building of the requisite size is to be sold or let, the seller or landlord has to make an EPC available at the earliest possible opportunity. This means that the certificate has to be provided the first time any written information about the building is supplied to the prospective buyer or tenant (e.g. with the sales or letting particulars) or, if earlier, the time at which the buyer or tenant views the building. In any event, the certificate must be provided before exchange of contracts.

Guidance published by the Government in January confirmed that this duty does not apply where contracts are exchanged on the relevant transaction prior to 6 April. It was not clear how the duty applied to properties which were already on the market, or transactions which were already in progress but had not yet exchanged, as at 6 April.

Regulations laid before Parliament on 13 March provide that the duty to supply an EPC prior to exchange will not apply where the property is put on the market prior to 6 April. At first sight this appears helpful for all those currently negotiating deals but, on closer analysis, the exemption may only be of limited assistance:

• The transitional provisions only relate to properties which remain "on the market" at 6 April. It is hoped that this will be interpreted to cover transactions currently in progress, as well as those where a buyer or tenant has not yet been found. Otherwise, transactions where a property has been taken off the market pending exchange will fall foul of the regulations unless an EPC is provided to the buyer or tenant prior to exchange. As at the time of writing, the government register of accredited assessors lists only a handful of energy assessors who are qualified to assess even the simplest commercial building.
• Even where the property remains on the market at 6 April, in order to take advantage of the exemption the seller or landlord must have intended that the building would be sold or let prior to that date. It will be very hard to demonstrate an intention to complete before 6 April where the property has only recently been marketed.
• The fact that the building is on the market must be made public before 6 April. This is presumably to prevent claims that buildings were on the market when in fact they were not.

The effect of the exemption is not to dispense altogether with the requirement to provide an EPC. If all the criteria are met, then as soon as possible following exchange of contracts the seller or landlord must commission an EPC, if they have not done so already, and supply it to the prospective buyer or tenant free of charge. It is not clear how this will work where exchange and completion are simultaneous. In this situation the seller will no longer be in a position to allow an energy assessor access to the building, although the buyer may have a duty under the regulations to co-operate to enable the EPC to be produced. It also seems at odds with the purpose of the original regulations, which was to provide a buyer or tenant with energy information to enable them to make a choice about the building they were going to occupy.

The exemption only lasts until 1 October 2008. After this time, an EPC must be provided prior to exchange in the usual way. It is to be hoped that by then there will be sufficient energy assessors to meet demand.

The transitional provisions will apply in a similar way to the duty to supply an EPC on the sale or letting of commercial buildings over 2,500 square metres coming into force on 1 July 2008.

It is regrettable that the latest regulations appear to have been put together in a hurry, without consultation and using principles from the Home Information Pack regime which do not translate well to commercial property.

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