Matthew Williamson, Partner in the Real Estate team at law firm Weightmans LLP, attempts to bring some clarity to the possible implications of the Energy Act to owners of industrial property.
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 April 1, 2018 latest.
The main issues;
- The Energy Act could affect anyone with an existing interest in a property which runs up to or past 1 April 2018 and anyone looking to acquire an interest in commercial property
- At present, April 1, 2018 is a long stop for the implementation of the operative provisions of the Act and it is possible that they will be 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 the property until the landlord has complied with the regulations
- Until these regulations are issued it is unclear what level of efficiency commercial property will need to achieve, but the Department for Energy and Climate Change (‘DECC’) guidance states the minimum standard is likely to be an Energy Performance Certificate (‘EPC’) ‘E’ rating. The issue with that is if the current EPC rating is unknown then the property owner or occupier has nothing to bench mark their obligations against
- Guidance from the Department for Energy and Climate Change (DECC) has been scarce. A new consultation paper is expected from the DECC on the minimum energy performance standard rules, but given the sensitivity of the issue there is a possibility that this paper will be delayed until after the general election, giving owners and occupiers even less time to comply with the legislation when it finally becomes law.
Do I need an Energy Performance Certificate? Is my property exempt?
- The good news for shed owners and others with B1, B2 and B8 properties is that if the property has no current requirement for an Energy Performance Certificate (EPC) then, by extension, it should not be caught by the Energy Act regulations in their current guise. The regulations state that an EPC is not required on the construction, sale or rent of industrial sites and workshops with low energy demand.
- Where it does apply, tenants must be wary of any provision in their current lease or any lease they propose entering into, which states that they must comply with ‘all legislation’. It goes without saying that landlords will be looking to push the cost of any improvement works onto tenants.
- 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, so do not require an EPC
- The EPCs Guidance states that 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 work stations but these alone will not attract a requirement for an EPC
What do you do if you think you will be affected by the Energy Act?
Despite the lack of information issued by the DECC to date, it is still important to keep up to date with the provisions of the Energy Act and how it will ultimately be implemented.
Although for those with manufacturing premises Section 49 of the Act may not apply, the frustrating element for those with ancillary buildings which may be affected is that people cannot plan with any certainty for modifications – if any are required – to buildings to meet the necessary standards.
Given the slow down in the number of accredited Assessor Organisations once the required standards are known, there may well be a case of demand outstripping supply as people rush to obtain finance through the Green Deal.
To date the take up has not been overwhelming but until the definitive stance is taken by the DECC there will continue to be this uncertainty.