It has been a legal requirement now for most properties, commercial and residential, that come onto the market, whether for sales or lettings, to have a valid Energy Performance Certificate (EPC).
In today’s blog we have a look at what an EPC is, when you need one and what the consequences may be for a poor finding in the report.
What is an EPC?
An EPC assesses how energy efficient a property is. This can include anything from the use of energy efficient lightbulbs to insulation and hot water systems. The less energy efficient a property is, the higher the energy bills will be. An EPC also shows the potential score for a property, if the recommended changes were made, and an environmental impact rating.
Most properties, when being sold or let out, need an EPC. EPC’s last 10 years, so they require renewing before a property can be remarketed once the EPC has expired.
Which properties need an EPC?
In general, all properties both commercial and residential need a valid EPC before being marketed. There are however some exemptions.
From January 2013 there has been an “exemption” for listed buildings. However, the exemption is qualified. It states, “Insofar as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance”. The qualification covers work that might be carried out to the property to improve its energy performance. These are works that would require consent under Part L of the building regulations (The Conservation of Fuel and Power) and would be included in the recommendations section of an EPC report if one was obtained. If such works would unacceptably alter the building’s character or appearance, then the listed building would qualify for an exemption.
Other exempt buildings include:
- Places of worship
- Temporary buildings that will be used for less than two years
- Stand-alone buildings (less than 50 square metres of floor-space)
- Industrial sites, workshops and non-residential agricultural buildings that don’t use a lot of energy
- Holiday accommodation rented out for less than four months per year
- Residential buildings intended to be used less than four months a year
- Unsafe properties, a property that poses a serious health and safety risk to occupants or visitors
- Properties to be demolished, properties that are due to be demolished where the marketing of the property, all the relevant documents and planning permission exists
EPC’s and the letting market
In 2016, The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 established the new Minimum Energy Efficiency Standards (MEES) in the residential and commercial private rented sector.
This was introduced by government to improve the quality of private rented buildings and reduce the overall CO2 emissions in accordance with the UK’s targets for decarbonisation. From 1st April 2018, phase one of the MEES regulations came into force which had big implications for landlords of private rented property. As a result of this, it is now deemed unlawful to let properties with an EPC rating below an “E” rating.
Landlords and their agents should act by commissioning an up-to-date EPC which will identify the current rating (which may have changed over time), and recommend opportunities for improvement.
There are however, various exemptions that apply to the prohibition on letting a property with an energy efficiency rating below E.
If a property meets the criteria for any of the exemptions, a landlord will be able to let it once they have registered the exemption on the PRS Exemptions Register.
The six types of exemption that can be registered are:
- All relevant improvements made exemption
This exemption can be registered if the property is still below EPC “E” after improvements have been made up to the cost cap (£3,500 inclusive of VAT), or there are none that can be made.
- High cost exemption
This exemption can be registered if no improvement can be made because the cost of installing even the cheapest recommended measure would exceed £3,500 (including VAT)
- Wall insulation exemption
This exemption can be registered if the only relevant improvements for the property are:
- Cavity wall insulation
- External wall insulation or
- Internal wall insulation (for external walls)
- Third-party consent exemption
This exemption can be registered if the relevant improvements for the property need consent from another party, superior landlord, mortgagee, freeholder or planning department, and despite best efforts that consent cannot be obtained, or is given subject to conditions a property owner could not reasonably comply with.
- Property devaluation exemption
This exemption is registerable if there is evidence showing that making energy efficiency improvements to the property would devalue it by more than 5%.
- Temporary exemption due to recently becoming a landlord
If a person has recently become a landlord under certain circumstances they will not be expected to take immediate action to improve their property to EPC “E”. They may claim a 6 month’ exemption from the date they became a landlord.
If you are putting your property on the market for sale or letting why not contact one of Alexander JLO’s expert property lawyers and see what we can do for you?