What are EPCs and when do you need one?

Energy Performance Certificates (EPCs) are a rating scheme to summarise the energy efficiency of buildings. The certificate gives an asset rating which places the energy efficiency of the property on a sliding scale using letters to indicate the bands: ‘A’ (the most energy efficient properties) to ‘G’ (the least energy efficient).

When do you need one?

In the following situations you will always require an EPC:

• Where an existing property is being sold or rented out irrespective of whether that sale/rental is done privately or not and/or whether the parties are connected.
• Where a new property is built
• Where an existing property is altered – but only in a fairly significant way
• Where a property is subject to a Green Deal plan.
• Disposals by insolvency officials.
• Auction sales.
• Intra-group sales or reorganisations, where there is some value passing.
• Short term lettings of commercial property, such as pop up shops.
• Lettings where the tenant does not pay the utility bills.
• Disposals of derelict buildings that do not satisfy the demolition test.
• Tenancies at will.
• Sales and leasebacks.

(Nb. This list is non-exhaustive.)

However an EPC is not required in the following situations:

• Lease renewals: not limited to statutory renewals, also renewal by negotiation
• Compulsory purchase transactions.
• Sale of shares in the company which owns the property.
• Lease surrenders.
• Living accommodation at a workplace/tied to a job (depending on the individual circumstances of the case).
• Not-for-value transactions (depending on the individual circumstances of the case).

Are any buildings exempt?

There is a surprisingly long list of buildings that are exempt from the EPC requirements, which is as follows:

1. Properties which do not have a roof or do not have walls. For example, a multi-storey car park with open sides would not qualify.
2. Properties that use no energy to condition the indoor climate. This means properties that have no heating, ventilation or air conditioning equipment. Hot water systems and lighting systems do not qualify as conditioning the indoor climate.
3. Properties that are not designed or altered to be used separately. Only buildings and building units are caught by the EPC Regulations.
4. Listed buildings or buildings within a conservation area but only “insofar as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance“. As this is quite vague the Guidance suggests that building owners will need to take a view or to seek the advice of their local authority’s conservation officer.
5. Religious properties. These must be used as places of worship and for religious activities
6. Temporary properties with a time of use of two years or less, however there is no definition of ‘temporary’ in the EPC Regulations.
7. Industrial sites, workshops and non-residential agricultural properties with a low energy demand. Again, there is no definition of ‘low energy demand’ in the EPC regulations.
8. Non-residential agricultural properties which are in use by a sector covered by a national sectoral agreement on energy performance.
9. Residential properties which are not used for much of the year; often called the “holiday let” exemption but is not confined to holiday lets. The basic rule is that the property must either:
   1) be used or intended to be used for less than four months of the year; or
   2) be used or intended to be used for a limited time each year, and be expected to consume less than 25% of the annual energy it would use if it were used all year.
10. Stand-alone properties which are smaller than 50 metres squared (regulation 5(1)(g), EPC Regulations). Stand-alone is a building that is free standing and entirely detached from any other building.
11. Buildings earmarked for demolition.

What are the penalties for not having one?

Enforcement will normally be carried out by Trading Standards Officers issuing penalty charge notices to those who fail to comply. Penalty Charges are:

• Residential – £200 for a dwelling.
• Non-residential – 12.5% of the rateable value of the building, with a minimum penalty of £500 and a maximum penalty of £5,000 for a commercial property.

A penalty charge notice may only be given within a period of six months beginning with the day on which the breach of duty was committed or, in the case of a continuing breach, beginning with the last day of that breach. There seems to be no prohibition on the enforcement officer taking action against a party who no longer owns the property (for example, the seller who should have provided an EPC but did not).

Emma Smart

19th February 2018