Given that the building sector is thought to account for about 50% of the UK's total carbon dioxide emissions both energy efficiency and climate change issues are set to feature highly in the regulation of the property sector in 2008. In particular the European Directive on the Energy Performance of Buildings requires Energy Performance Certificates (EPCs) and Display Energy Certificates (DECs) to be provided for all buildings placed on the property market for sale or rent.
When?
The requirements will be implemented in three phases during 2008 but for the purposes of sports stadium construction specifically from 6 April 2008 EPCs will be required for the construction, sale or rental of non-dwellings with a floor area greater than 10,000m2. This will also apply to all commercial buildings of more than 2500m2 from 1 July 2008 and to all other commercial buildings from 1 October 2008.
What?
An EPC will provide an energy rating for a building which is based on the performance potential of the building itself (the fabric) and its services (such as heating, ventilation and lighting). It will be accompanied by a recommendation report on how the energy performance of the building could be enhanced, this report must be retained and held with the certificate itself. From 1 October 2008 DECs are also required for all public buildings with a total useful floor area over 1000m2 occupied by public authorities and by institutions providing public services and must be placed in a prominent place clearly visible to the public.
Why?
An EPC is intended to inform potential buyers or tenants about the energy performance of a building, so they can consider energy efficiency as part of their investment or business decision to buy or occupy that building; an important consideration for company directors who now have a duty to have regard to the impact of their company's operations on the community and the environment.
Who?
In the case of a newly constructed building, the building contractor will be responsible for providing the EPC certificate to the owner; clearly this will now become an essential part of the commissioning process. For buildings that are to be let it will be the responsibility of the landlord. Government guidelines state that a valid EPC and recommendation report must be made available free of charge by a seller or landlord to a prospective buyer or tenant and at the earliest opportunity, which in any event must be before entering into a contract to sell or let. The guidelines do state, however, that a lease renewal or extension does not amount to a sale or let and therefore it seems that EPCs will not be required in these circumstances. Conversely buildings that are to be demolished may well require an EPC unless conditions such as a sale with vacant possession and intent to demolish can be proven.
Failure to obtain an EPC may result in a penalty charge. In most cases this will be fixed at 12.5% of the rateable value of the building, capped at a maximum penalty of £5000.
An EPC for a non-dwelling will last for 10 years. If there is a change of tenants but the EPC is still valid, a new certificate will not be required. EPCs and the reports are to be registered with the Local Authority and records kept for 20 years.
In terms of any potential impact that an EPC may have on a building's value it is thought that buyers may be in a slightly better position to negotiate a better price if the EPC shows a low rating. It is recommended that energy assessors are appointed at an early stage so that this can not lead to any delay in a transaction; there is some speculation that during this year there may not be sufficient numbers of assessors trained to handle the commercial property market. This could lead to inflated costs and delays.
How Will This Affect The Sports Industry?
Although a stadium may not strictly fall under the definition of a building for the purposes of the regulations, developers and sports clubs and associations will still be under an obligation to ensure that the adjoining buildings comply with the regulations set out under the Directive. Such bodies firmly placed in the public eye may wish to take the lead in the implementation of such initiatives.
Last summer the England & Wales Cricket Board and their domestic test match sponsor Npower announced plans to work together on the first 'green audit' of a sport by a UK national governing body. This proposed to review energy use at the UK's seven test match grounds in order to reduce carbon emission by at least 10% by this spring.
Commercial Implications
Clearly the better the energy efficiency rating of a building the lower fuel bills are likely to be. We have seen already the decision of certain US pensions funds not to invest in property that does not meet certain high environmentally friendly criteria. Other high profile companies such as Marks and Spencer have made notable, well publicised efforts to increase both the energy efficiency of their building stock and energy use in those buildings. This could well lead to a two tier market emerging that differentiates between improved, energy efficient properties commanding higher values and higher yields against those which are not improved and which will have lower values and yields.
It is not yet clear whether a poor EPC rating will actually compel landlords to implement measures to improve this. The display of these reports and implementation of their recommendations are not mandatory. There is, therefore, scope for debate whether landlords should be required by tenants to undertake certain improvement works or whether landlords can enforce upon tenants requirements as to the efficient use of energy in their buildings. This could lead to the difficult situation where although landlords may be able to command a premium for a more energy efficient building they may not be able to fully recoup the costs of improvements made to increase the energy efficiency of that building, and therefore to improve its EPC rating, because tenants may not be prepared, or even obliged under their leases, to repay these costs. However, it is the tenant that would benefit in the long run through savings in use or running costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
