Until now, Energy Performance Certificates, or EPCs, have only been required for residential premises as part of the controversial Home Information Packs arrangements. However, from 6 April 2008, the obligation to provide an EPC applies to commercial premises. This means that when a building is to be sold or rented out, the seller or landlord must provide any prospective buyer or tenant with a valid EPC at the earliest opportunity. The obligation is being introduced in stages. Initially it applies only to premises with a total useful floor area of over 10,000 square metres. There are transitional arrangements in place as to when the obligation applies. The remaining stages for the introduction are in July and October this year.

The requirements for EPCs are more complicated for buildings that are multi-let and mixed-use properties. Guidance indicates that, in general, the EPC should reflect the extent of the space being offered for sale or rent. Therefore, if a building is made up of separate commercial units, but has a common heating system, either

  • One EPC can be prepared for the whole building; or
  • An EPC can be prepared for the part of the building that is being offered for sale or rent.

In a mixed-use building with a common heating system, the commercial areas of the building can be assessed on a common EPC. Where the heating system is not shared with separate commercial units within a building, an EPC is required for each part of the building that is being offered for sale or rent.

Landlords and sellers should therefore be aware at an early stage of their obligations to provide such certificates. Tenants should be aware that they have a duty to co-operate with a landlord to allow a landlord to comply with the duty to prepare an EPC and should also note that if they either transfer their existing lease or sublet their premises then they are also bound by the requirements to provide an EPC (although in the latter case they can ask their immediate landlord to obtain an EPC for the whole building which may alleviate the costs to the tenant). However, the obligation does not extend to lease renewals or extensions.

As an additional requirement, an EPC must be accompanied by a recommendation report containing suggestions for the improvement of the energy performance of the building.

One major factor to be taken into account is the cost of producing such a certificate. A seller is obliged to bear the cost but a landlord may find ways to pass on all or some of the cost on to a tenant, for example through the service charge. Tenants should therefore be alive to this issue. The new Code for Leasing Business Premises in England and Wales 2007 urges the parties to a lease to ensure that the lease clearly addresses the costs associated with EPCs since, as yet, there is no standard market practice.

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 which have implemented these changes also amend the Building Regulations 2000 so as to require a developer to produce an EPC when a building is erected or converted into fewer or more units and the services in the building are modified. Unless an EPC and report have been given to the owner of the building by the developer, the building control inspector cannot issue a completion certificate for the works.

The provisions relating to EPCs and commercial premises are extensive and careful consideration must be given to them by sellers, landlords and tenants alike.

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.