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Understand EPC changes or risk £5,000 penalty
New regulations affecting buildings' energy performance are due to come into force next month.
The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2011 go live on 6 April 2012.
While changes to the existing legislation might appear relatively minor, the 2011 Regulations will have a significant impact on the Energy Performance Certificate (EPC) requirements at the marketing stage of a property.
Sellers, landlords, and agents of commercial property in particular, will need to be alert to the immediate changes to avoid fines of up to £5,000 for failure to comply with the new rules.
What is changing?
The 2011 Regulations will amend the existing legislation – The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 – in three ways:
- from 6 April 2012, EPCs will be required on marketing for non-domestic and rental properties as well as residential properties
- written property particulars will have to include a copy of the first page of the EPC – it will no longer be permitted to include only the asset rating
- air conditioning reports will require registration on the central EPC register
EPC requirements at the marketing stage
Following the suspension of Home Information Packs in May 2010, the duty to ensure an EPC was available or had been commissioned was retained for residential property sales, but there was no similar obligation for non-domestic sales and rentals.
Under the existing regulations, a residential property seller must ensure that an EPC is either available or has been commissioned before the property is put on the market (Regulation 5A (2) of the 2007 Regulations).
There is also a complementary duty on the person acting on behalf of the seller to be satisfied that an EPC exists or has been commissioned, before they start marketing the property on the seller’s behalf (Regulation 5A (3)).
Where marketing starts and an EPC is not available, both parties have a duty to use ‘all reasonable efforts’ to secure an EPC within 28 days, starting on the day the property is first put on the market (Regulation 5A (4)).
The 2011 Regulations amend the existing legislation by removing the reference to ‘residential property’, and extending the requirement to have commissioned an EPC at the marketing stage to commercial properties and all rental transactions.
The period during which all reasonable efforts must be made to secure an EPC will also be reduced, from 28 days to seven. If an EPC is not obtained within seven days, the seller and person acting on the seller’s behalf have a further 21 days to secure an EPC, after which the defence of using all reasonable efforts is no longer available (Regulation 5A (4A)).
Requirement to attach first page of the EPC to written particulars
A further amendment that will be of interest to agents marketing a property on behalf of a seller or landlord, is a change to what information must be included with the written particulars for a property.
Under the existing regulations – for residential sales only – the seller or person acting on their behalf is required to ensure that either the asset rating or the EPC is included with the written particulars for the property (Regulation 6(2)).
The 2011 Regulations will remove the option of including only the asset rating, so that first page of the EPC must be ‘attached to the particulars’ in all cases.
The 2011 Regulations also remove the reference to ‘residential property’, so that the requirements in Regulation 6 extend to commercial properties and rentals.
Agents seeking to comply with the new requirements will need to take particular care to ensure the first page of the EPC is properly ‘attached’ to the particulars.
While there is limited guidance available on the 2011 Regulations, the Department of Energy has confirmed that ’attaching’ means – in case of a hard copy brochure – stapling, glueing, taping etc. It will not be acceptable to insert the EPC loose into a brochure, as it must be physically attached.
For the avoidance of doubt, the requirement to include the first page of the EPC also extends to web brochures as well as hard copies.
The rationale behind this amendment is that it will make it more likely that potential buyers and tenants will see the recommendations attached to the EPC, rather than just the asset rating.
Conveniently, the 2011 Regulations will also coincide with the introduction of a new look EPC, to be introduced in April 2012, which will show potential cost savings and recommended improvements on the first page.
Air conditioning reports
The existing regulations require that air conditioning systems over 12kW are inspected every five years (Regulation 21), and that an inspection report is obtained (Regulation 22).
The inspection reports must include an assessment of the air conditioning efficiency and the sizing of the system compared to the cooling requirements, plus appropriate advice on possible improvement or replacement of the system along with possible alternatives.
The existing regulations already include a requirement to lodge EPCs and accompanying recommendation reports on the central England and Wales Register kept on behalf of the Secretary of State (Regulation 31(1)(a)). Although there is no requirement to lodge air conditioning inspection reports, assessors are encouraged to do so on a voluntary basis.
The 2011 Regulations will amend the existing regulations by making it mandatory for air conditioning inspection reports to be lodged on the central register, putting them on the same footing as EPCs (Regulation 31(1)(d)).
The 2011 Regulations will also permit the charging of a fee – currently £5.36 – for lodging an inspection report on the central register.
How will the new regulations be enforced?
Every local weights and measures authority is responsible for enforcing the duties set out in the 2007 Regulations in their area (Regulation 38(1)). This duty extends to the enforcement of the new obligations introduced by the 2011 Regulations.
Under the existing regulations, trading standards officers also have the power to require a relevant person (the seller or landlord) to produce a copy of the EPC for inspection, and to take copies if necessary (Regulation 39).
The 2011 Regulations will extend these powers in relation to Regulation 5A (3), which is the duty to ensure that an EPC is commissioned before marketing starts.
In cases where the marketing starts before the EPC has been obtained, sellers, landlords and other persons acting on their behalf, should be able to demonstrate that an EPC has been commissioned.
The changes introduced by the 2011 Regulations will apply to properties marketed after 6 April 2012. However, there are saving provisions for residential properties marketed before 6 April 2012, which may continue to rely on the existing regulations, and in particular the longer time periods for obtaining an EPC.
What are the consequences of non-compliance?
The existing regime of penalty charge notices for non-compliance with the 2007 Regulations will continue to apply, but will be extended to the new EPC requirements introduced by the 2011 Regulations.
As penalty charge notices may be imposed on any person under a duty under the regulations, they extend to a seller or landlord as well those acting on their behalf.
The level of penalty charge that may be imposed is dealt with by Regulation 43. For non-compliance in the case of residential dwellings, a penalty charge is limited to £200, but in the case of commercial properties the penalty for non-compliance is determined by a sliding scale based on the rateable value, subject to a minimum penalty of £500, up to a maximum £5,000.
Avoiding a penalty notice
The main risk of non-compliance with the new requirements is not being aware of the changes.
Complying with the new regulations should not require dramatic changes to current practice or a significant increase in business costs provided sellers, landlords, and those acting on their behalf remember:
- from 6 April 2012 EPCs will be required at the marketing stage for all properties
- where an EPC is not available, ‘all reasonable efforts’ must be made to obtain one within seven days of the property going on the market; and in any event, within 28 days of marketing
- where an EPC is available at the marketing stage, the first page must be ‘attached’ (not inserted loose) to the written particulars of the property; and simply including the asset rating within the particulars is not acceptable.
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