UK: Everything’s Gone Green

Last Updated: 25 July 2012
Article by Ben Dunbar

The last few months have seen the government launching a raft of initiatives aimed at improving the environment and encouraging greater energy efficiency in buildings.

The green agenda is still a priority for the government. On 6th April 2012, important changes came into force in respect of Energy Performance Certificates (EPCs), air conditioning reports and the control of asbestos.

The government has also introduced a "Green Deal" which could be used to finance energy efficiency improvements to commercial properties.

Finally, the government has launched a formal consultation on the existing Carbon Reduction Commitment Energy Efficiency Scheme (CRC) following widespread feedback that it is overly complex.

EPCs

An EPC is now required before marketing a property for sale or letting, whether commercial or residential.

If this cannot be done, the seller must make all reasonable efforts to obtain an EPC within seven days of the property going onto the market. If it has not been obtained within seven days, the seller has a further 21 days to provide the EPC after which they will be in breach of the regulations.

Under the previous regulations, only sellers of residential property needed to ensure an EPC was available before the property was put onto the market. There was no similar obligation for commercial sales and rentals. EPCs only had to be provided at "the earliest opportunity" before parties entered into a contract for sale or lease. The government was concerned that the seller was leaving it until the last minute to provide the EPC, handing it over just before exchange of contracts when it would be too late to influence the decision whether or not to proceed with the transaction.

The government also plans to prevent landlords from letting premises with an EPC rating of "E" or below. This is understood to affect as much as 18% of UK commercial property, some 600,000 premises. It is unclear when this restriction will come into place but it will be before April 2018.

Marketing particulars

As well as the tighter timescale for providing the EPC, the first page of the EPC must be included in the written particulars in respect of both residential and commercial property. The government hopes that this will alert potential buyers and tenants earlier to the recommendations for potential efficiency improvements that are contained within the EPC, so that buyer or tenant can consider the potential costs and benefits.

Data in EPCs

Data in EPCs is to be lodged on a central register and will be publicly available. The government has confirmed that there are already over 7 million EPCs on the register and the number is growing by a million per year.

It will be possible for property owners to opt out of their data being made public.

The government has confirmed that it will be making available bulk EPC data to "selected organisations". This is likely to be the "green deal" providers to enable them to market offers to undertake works in respect of improving energy efficiency.

Sanctions

Sellers or agents acting on their behalf need to ensure that they commission EPCs earlier in their transactions as any breach of the regulations can result in a penalty charge being applied by a trading standards officer. For residential properties the penalty charge is £200 but in the case of commercial properties it varies on a scale based on the rateable value of the property up to a maximum of £5,000.

Air conditioning reports

Changes to the existing regulations have made it compulsory for air condition inspection reports to also be lodged on the central EPC register.

Asbestos

The Control of Asbestos Regulations 2012 also came into force in April 2012. These implement changes required by the European Commission regarding the protection of workers from the risks of exposure to asbestos at work. In practice the changes will mean that far fewer types of lower risk work will be exempt from the three requirements to:

  • Notify the work to the relevant enforcement authority
  • Carry out medical examinations
  • Keep registers of work with asbestos

Contractors will need to consider whether they wish to deal with these responsibilities or sub-contract even simple tasks so that we could see an increase in work for asbestos specialist contractors.

CRC

Following criticism from business that the CRC is unduly complicated and imposes a heavy administrative burden on those businesses and organisations within the scheme, the government is undertaking a formal consultation on whether to simplify the scheme. The government has confirmed that if the consultation is unable to identify significant reductions in the administrative burdens involved, then later in 2012 the government will simply replace the CRC with an alternative environmental tax. This means that the fate of the CRC is unclear. Many experts believe that the CRC will be abolished and replaced with a more straightforward environmental tax.

Green Deal

The Green Deal is the government's initiative under the Energy Act 2011 to allow owners of properties to secure finance to undertake energy efficiency improvements to properties. There are no up front costs for the works to be undertaken (such as loft installation) and the costs are paid for over time in instalments to the energy supplier through the energy bills for the property. The payments will be made by the person who is for the time being liable to pay the energy bills, meaning that the debt will in effect run with the property and attach to the bill for the property rather than the original person who undertook the improvement if they sell the property or are not the occupier paying the bills.

The government has indicated that the Green Deal will be available later in 2012 in respect of residential properties. The government has not yet set a date to roll out the Green Deal to commercial properties, so it is unknown when this will happen. In principle the Green Deal could be used to finance energy efficiency in commercial properties.

If landlords wish to access Green Deal finance, they will be advised to consider their leases to ascertain whether they will be able to recover the costs through the service charge or the outgoings clause. In cases where tenants directly pay electricity charges to the electricity supplier, the tenant's consent to any Green Deal works would be required. Like the CRC, the Green Deal poses difficulties for landlords and tenants and could be a source for dispute between them as a result of their varying interests in the property.

The first national press coverage of the Green Deal was negative, when there was controversy over the so called "conservatory tax", which would have forced people to upgrade the energy efficiency of their homes (so as to boost uptake of the Green Deal) when undertaking extensions. However, as the above shows, the government is pushing on with the green agenda.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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