16 June 2014 | Matthew Williamson
The implication of not planning for the Energy Act is that landlords or tenants may unwittingly find that their property is caught by its regulations, which are to be introduced by (at the latest) 1 April 2018.
It is vital that anyone looking to acquire an interest in commercial property whose interest will run past the anticipated implementation date takes steps to cater for, or, as a minimum, becomes aware of these provisions. It is also important to note that 1 April 2018 is a long stop for the implementation of the operative provisions of the Act and it is possible they are made law before then.
The main provision to be aware of is Section 49. This states that a landlord of a non-domestic property may not let it until they have complied with the regulations.
Until these regulations are issued it is unclear what level of efficiency a commercial property will need, but the Department of Energy and Climate Change (DECC) guidance states the minimum standard is likely to be an Energy Performance Certificate (EPC) ‘E’ rating. The issue is if its current EPC rating is unknown, the property owner or occupier has nothing to benchmark their obligations against.
Guidance from DECC has been scarce although a new consultation paper has been expected on the minimum energy performance standard rules for a number of months. But given the sensitivity of the issue there is the possibility the consultation paper will be delayed until after the 2015 general election giving owners and occupiers even less time to comply with the legislation when it becomes law.
The good news for shed owners and others with B1, B2 and B8 property classifications is that it appears if the property has no requirement for an EPC, then by extension it should not be caught by the regulations. Where it does apply (i.e other forms of commercial property) tenants must be wary of any provision in their current lease or any lease they propose entering into which states they must comply with ‘all legislation’. It goes without saying landlords will be looking to push the cost of any improvement works onto tenants.
Do I need an EPC? Is my property exempt?
The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 define a building as "a roofed construction having walls, for which energy is used to condition the indoor climate". This would include buildings that have fixed heating, mechanical ventilation or air conditioning. However, buildings that only have hot water or electric lighting do not fall within the EPB Regulations 2007, and so do not require an EPC.
The regulations state an EPC is not required on construction, sale or rent of (among other types of building) industrial sites and workshops with low energy demand. The EPC guidance states this exemption covers buildings whose purpose is to accommodate industrial activities in spaces where the air is not fully heated or cooled. This may include foundries, food and drink packing plants, storage and warehouses. Such buildings may have local heating or cooling appliances to serve people at workstations but these alone will not cause an EPC to be required.
Despite the lack of information issued by DECC it is important to keep up to date with the provisions of the act and how it will be implemented. The frustrating element for those with buildings which may be affected is not being able to plan for modifications (if required) to meet the necessary standards. Given the slowdown in the number of accredited assessor organisations once the required standards are known, demand may well outstrip supply as people rush to obtain finance through the Green Deal. To date the take up has not been overwhelming but until a DECC decision is taken the uncertainty will continue.
☛ Matthew Williamson is a partner in the real estate team at Weightmans