EPC Rules of Thumb
- All commercial properties with heating/conditioning systems require an EPC when being offered for sale
- The cost of an EPC is much less than the penalities for not having one
- You must apply for an EPC within seven days of advertising a relevant business for sale
- An EPC assessment can sometimes be made on one unit in a block and applied to others
- Each EPC is unique. Always seek advice from an EPC professional before obtaining an EPC
- Brokers and agents could also be liable for their clients failing to have an EPC
What's an EPC?
If the term 'EPC' confuses you, look no further - BusinessesForSale can help.
An EPC - or Energy Performance Certificate - is a document required by business sellers and lessors providing information on the energy efficiency and likely carbon dioxide (CO2) emissions from their property or premises.
Energy efficiency and carbon efficiency are both estimated and rated on a scale, ranging from the most efficient 'A' rating to the least efficient 'G'.
The EPC will recommend ways to improve a building's energy rating and cut costs. However, owners are not obligated to act on the recommendations.
Both commercial and residential buildings require an EPC, meaning shops, offices, factories or workshops as well as residential flats and houses. Adjoining accommodation (for example, a flat above a shop) may require a separate EPC.
The selling or assignment of business premises triggers the need for an EPC, if one is not already in place. EPCs are valid for 10 years.
Why do I need an EPC?
An EPC is part of an ongoing government programme to reduce the UK's carbon footprint, and EPCs are legally required if your business sale or letting meets the criteria below.
New changes in EPC requirements come into force on 6th April 2012. The changes are as follows:
- An EPC should be applied for within seven (7) days of an advertiser marketing the property on businessesforsale.com.
- Brokers/agents and private sellers must use "all reasonable efforts" to obtain the EPC.
- However, if sellers use all reasonable efforts to apply for an EPC within the seven (7) day period they have a further twenty-one (21) days to obtain the certificate. Therefore all sellers must have an EPC in their possession within 28 days of the start of marketing.
- The entire EPC certificate should be attached to a business listing advert if possible, or if this isn't possible the first page as a minimum must be attached.
- Owners of commercial premises can obtain an EPC before they put their business up for sale - in fact we recommend obtaining one as soon as possible. However, the above legal obligations apply only when an owner decides to market their business premises for sale or lease.
- All of the new rules above apply only to business premises that are marketed for sale or lease on or after 6 April 2012.
75% of all properties on the market that should have an EPC do not have them
Sue Radcliffe, John Racliffe and Sons
How can I determine whether my business needs an EPC?
If the building 'uses energy to condition the indoor climate' (ie, uses heating or air-conditioning) then it will most likely require an EPC. Each unit within a building with its own conditioning system will need an individual EPC.
- Selling or letting a building as a whole: You'll need an EPC for the whole building, even if that building is divided into parts using separate heating systems.
- Selling or letting part of a building: If a building has a common heating system, then the seller or prospective landlord can either prepare an EPC for the whole building or prepare an EPC for the part being offered for sale or let based on energy use per square metre for the whole building or based on a similar representative unit in the same building.
- Buildings with separate parts and separate heating systems: An EPC should be prepared for each part of a building that is being offered separately for sale or let. Again, the EPC may also be based on an assessment of a similar representative unit in the same building.
- Shared or communal areas in buildings with independent heating systems: if the purpose of the conditioned space is mainly for access then energy consumption of the shared space is allocated to each unit in accordance with the proportion of the total floor size their unit uses.
A business with warehouse, retail space and offices will need one EPC for the whole building, whereas each unit in an industrial estate with separate heating systems requires its own EPC.
Are there any EPC exemptions?
EPCs are not required on the construction, sale or rent of places of worship, temporary buildings, commercial buildings with a total useful floor area of less than 50m2, industrial sites, workshops and agricultural buildings with low energy demand and on buildings due to be demolished if sold.
Warehouses, food and drinks packaging or heavy engineering plants not requiring conditioning or heating or heated for only a few days a year are exempt. Lease renewals or extensions, compulsory purchase orders and lease surrenders are exempt.
However, unfurnished buildings with gas or electric meters will need an EPC, as these indicate an intention to condition the climate.
Also premises are obviously essential, so those with online businesses do not require an EPC.
Should I act upon the recommendations in my EPC?
Legally there is no obligation, but commercially and environmentally, taking steps to save energy makes sense. If business owners receive their EPC in advance of a sale they can act on the recommendations report, which could make the business more attractive to buyers. Buyers can factor EPC recommendations and ongoing energy costs into their decision making process.
Who is responsible for producing an EPC, and what must they do?
The landlord, seller of existing premises, or the party who constructed a new building, is legally responsible for providing an EPC.
However, brokers/agents acting on behalf of sellersmust satisfy themselves that an EPC has been commissioned by their clients before marketing the property or be at risk of being liable for a fine under the relevant regulations.
The EPC should be given to the prospective tenant or buyer at the earliest opportunity and no later than when written information is provided about the building, when a viewing is carried out, or in any event, before entering into a contract to sell or let.
The builder of a new building or existing buildings that are modified must give the building owner an EPC and recommendations report before the local authority planning department will produce a certificate of completion.
How do you obtain an EPC?
If you are considering selling or letting your property you need to arrange an energy assessment by a properly accredited assessor. Surveyors, estate agents and energy suppliers can all carry out energy assessments. Government-approved energy assessors will lodge EPCs in the national register.
Information is collected and collated about the building's uses, dimensions, number of floors, amount and type of glazing, lighting, heating systems, fuel used and thermal efficiency of floors, walls and ceilings.
Landlords and owners are given a copy of the EPC, which will have a reference number. The EPC is accessible on the register by providing this reference number.
The time taken to receive an EPC is dependent on the premises in question.
The penalities for failing to obtain an EPC far outweigh the cost of obtaining one.
What are the costs of an EPC and the penalties for not providing one on time?
The cost of securing an EPC for commercial property varies depending on the nature of the property and the provider, however current rates quoted have been from £50-£300. In the future, market forces may serve to escalate the cost of EPCs.
The penalty for failing to make an EPC available to any prospective buyer or tenant is fixed at 12.5% of the rateable value (based on rental value) of the building. The minimum penalty is £500 and the maximum penalty is £5,000.
Either way, the penalty charges far exceed the cost of obtaining an EPC.
Failing to pay the penalty could lead to further penalty charge notices. It should also be noted that the local authority can request a copy of an EPC up to six months after the premises are advertised for sale.
Anyone who feels they been unfairly issued with a penalty notice can appeal within 28 days of receiving the notice. There will be no penalty charge notice if the owner has used all reasmnable efforts to requested an EPC within 7 days of marketing the property. However, they must make the EPC available for inspection as soon as possible.
What is the impact of not having an EPC?
Sue Radcliffe believes that small businesses will suffer a number of consequences if they fail to obtain an EPC in advance of a sale or lease. She says "Firstly, a fine could lead to cash flow problems. Also, an EPC aims to make a property more efficient and less expensive to operate."
Businesses without an EPC cannot take advantage of the government grants made available to make premises more energy efficient.
How can business brokers help their clients?
Brokers have a professional obligation to tell their clients that their lawyers are the ones who can help them comply with the law. But brokers should still be advising their clients of their obligations regarding the provision of EPCs on buildings they are selling or letting.
Whether a client is thinking of selling, letting or buying a business, it may be worthwhile to secure an EPC now.
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