Next month sees the introduction of new regulations for Energy Performance Certificates (EPCs) which will effectively assess and show a building’s energy efficiency. Buildings account for around 50% of the UK's carbon emissions and EPCs aim to help reduce these emissions through greater energy efficiency.

From 6 April 2008, an EPC will be required on the construction, sale or letting of commercial buildings over 10,000 sq meters. The regulations will apply to buildings over 2,500 sq m from 1 July 2008, and all other buildings falling within the regime from 1 October 2008.
The key requirements are:

• New buildings and large buildings subject to major renovations must meet minimum energy performance standards;

• a feasibility assessment of alternative heating and energy supply systems must be carried out before construction of any new building with a total useful floor area of more than 1,000 sq m;

• from the relevant date, sellers and landlords will have to provide an EPC to prospective buyers and tenants;

• Display Energy Certificates ("DEC") are to be displayed prominently in public buildings and by institutions providing public services to a large number of people;

• boilers and air conditioning systems with an output of more than 12 kw must be inspected on a regular basis.

EPCs and DECs have to be accompanied by recommendations for improving the building’s energy performance. Once issued, an EPC has a 10 year life span.

So, what are the implications for the construction industry, landlords and tenants?

It is the responsibility of the relevant person to provide the EPC, which will be the seller or the landlord of part. Problems may arise where a landlord of a multi-let building does not provide an EPC, although government guidance is being produced to assist in these instances.

There will inevitably be initial outlay costs associated with incorporating insulation, more efficient boilers and low or zero carbon systems such as solar panels.

Once the regulations are in force, additional costs will be borne by developers and purchasers of buildings in checking EPCs for existing buildings and perhaps even obtaining warranties for new-builds.

Buyers may want some form of warranty protection from the expert who prepared the EPC and leases may need to impose new energy obligations on landlords and tenants - inevitably increasing the work needed to be undertaken in negotiating a transaction.

Conversely, the marketability of a building may be higher if it complies with the standards imposed; allowing owners to report positively on the building’s environmental impact and attracting a higher rent/premium. Compliant buildings may also have an advantage in attracting investors and prospective tenants.

Joanna Nicholls is an Associate specialising in Commercial Property at Howes Percival LLP in Norwich.