A Powerful Incentive to Be Green; Commercial Property: Focus on Property Management Angus White, Director of Naylors Chartered Surveyors and James Houghton, Building Services Manager at Koru Property Services Explain Energy Performance Certificates, the HIPs of the Commercial Property Industry

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Byline: Angus White & James Houghton

WHILE much media attention has been focused on the Energy Performance Certificate (EPC) requirement for homes in recent months, April 2008 will bring the phasing-in of EPCs for commercial property.

From then, lettings and sales of commercial space of more than 500sqm will need to be accompanied by an EPC, with an October 2008 target for all remaining buildings.

The introduction of EPCs is the Government's response to the European Union 2002/91/EC Energy Performance of Buildings Directive (EPBD). This could be seen as another layer of legislation which needs to be met by property owners and developers to achieve a disposal, along with the need for fire risk assessments, asbestos audits and the rest.

Indeed, it will become part of the lengthening list of pre-contract inquiries issued by solicitors to property owners and managing agents. However, the certificate will become an increasingly important part of the asset management of a building and will help to direct investment decisions by property owners and managers.

The law behind the certificates is to promote more sustainable use and occupancy of buildings and suites by issuing a rating so potential occupiers are aware of the efficiency of the space in energy terms. From a financial point of view, it will also mean an occupier, when considering space, will now be able to compare energy costs as part of the overall occupational costs.

In the past, rent, rates and service charge were the three figures combined to give an occupier an indication of their "real" occupational costs. Now, the production of an EPC will mean energy costs are added to this list, so allowing a potential owner or investor to compare space in more detail.

The effect of this is clear. Where two similar buildings or suites have comparable occupancy costs rent, rates and service charge, but one is substantially better than the other in EPC performance, occupiers are likely to choose the more highly rated and therefore cheaper space.

As Article 7 of the EPBD requires the production of EPC recommendation and advisory reports when buildings are constructed, sold or rented out, the obvious response with respect to new buildings is to include the EPC as part of the operating and maintenance documentation when the building is completed.

However, and this is where commercial agents will become involved, owners will be responsible for procuring the certificate and advisory report on their current buildings. What's more, information on an EPC is valid for only 10 years, after which a new report will be required.

The production of the EPC pack will involve a detailed inspection of the building by a competent and approved assessor, who will inspect the installed building services and the type of construction (such as type of windows and insulation). …