Changes to EPC Regulations

The Government have announced a number of likely changes to the EPC regulations that will see the regulations for commercial property having some parity to the requirements for residential property. Mostly notably is the removal of the words that allow the production of an EPC to be left to the very last minute in the property transaction. Many Agents argue that nobody ever asks to see the EPC so what’s the point. You don’t have to look very far on the Internet to find them bleating about how much extra work they may now have to do to press print on their computers. Yet few Agents understand what the EPC is let alone understand the technical recommendations. To keep life simple Agents don’t make purchasers or potential lessees aware that an EPC is available hence no one asks to see it. Whilst the property that has a poor energy rating may be more difficult to sell or let, the ones with a good rating should be promoted because a good rating means lower running costs. Energy costs are only going to get more and more expensive. I had a conversion with a client last week who had a new boiler fitted to replace his old antiquated one. The new boiler was at least 30% more efficient than the old one. He commented was that he hadn’t noticed his bills going down. Arh I pointed out the price of oil has risen by at least 40% in the last six months. Yes he agreed at some thought, his bills hadn’t gone down but they hadn’t risen that dramatically either. Another change to the regulations is the period during which an EPC should be produced. I don’t think this will change anything other than help to promote the idea that an EPC must be produced when a property is first put up for sale or let. It will be interesting to see how many Agents do this. Publishing the full EPC with the sales particulars seems a bit over the top. A commercial EPC has one useful page and the Recommendation report has perhaps 2 useful pages out of a likely 8 pages. It would much better to have a way of summarising the Recommendation report. It will be interesting to see if the proposed changes are approved before the likely implementation date of 1st July 2011. Hopefully they will and it will see greater emphasis placed on the EPC and more people asking to see it and wanting to understand that the EPC and the Recommendations will save a building user real hard cash.

Energy Performance Certificates

There is no doubt that you get what you pay for and never has the term ‘pay peanuts get monkeys’ been more apt. I provided a fee quotation recently to assess an empty resturant building. My recent fee quotation was just too expensive for the Landlord but nevertheless my quotation to the incoming tenant to prepare his Schedule of Condition was considered acceptable.

I just happened to be at the property when my cheaper ‘competitor’ was at the property preparing the EPC. I was interested to observe their technique whilst not revealing that I was also an Energy Assessor. No apparent measuring equipment was used to collect the floor areas or window sizes or floor heights. I’m sure all of the software for preparing EPC’s requires such data especially when the available architectural plans were inaccurate and only at 1:200 scale.

I was even more surprised though to see the completed Recommendation Report that accompanied the EPC. In it was a recommendation for cavity wall insulation. The building we were both in was at least 150 years old and had solid brick walls.

I was also puzzled how an assessor can complete their survey, which should include the roof spaces when they didn’t have a ladder with them. Have extendable legs become or stilts become standard issue now? If so how do I get a set?

Will Trading Standards wake up anytime soon and realise they have an easy income source pursuing EPC non compliance?

For the last two years Trading Standards, who are the enforcing authority for Energy Performance Certificates have taken very little interest in pursuing non compliance of an EPC. It’s not been a priority and perhaps rightly so with the problems of counterfeit goods etc being harmful to health. With big cuts coming to Local Authority budgets next year will Trading Standards have to become more enterprising about how they raise their operating budgets? Fines for non compliance are based on 12½% of rateable value, the potential fines are not small by any stretch of the imagination.

Trading Standards are facing a cut in their budget. Will they look for an easy income stream to fund their other activities?

Enforcing compliance with Energy Performance Certificates is easy; it can be done without leaving their office, completed by an office junior even. It’s as simple a process as:

• A simple internet search to identify properties being marketed in their area.
• A simple check of the Landmark register via the address will show whether an EPC exists or not.
• A letter to the letting or marketing agent giving 7 days to provide the EPC will flush out those who haven’t got an EPC.
• A simple few minutes processing the paperwork and a prosecution is underway and a big fat fine will be heading to the Trading Standards revenue account.

It’s as easy as ABC. Will it happen? Well I’m not holding my breath because it requires someone with ambition, employed in a Council with an entrepreneurial spirit towards revenue generation.
There could though be a good consultancy role…………now where’s the phone number for my local Green Party councillor.

Break Clauses - use them dont ignore them

In a tenants market it is foolish for a tenant of commercial premises to not have a break clause incorporated in a new medium or long term lease. I recently heard of a retail tenant who signed up to a ten year Full Repairing and Insuring lease with a personal guarantee given on the lease by the owner of the business.

The business went into liquidation after a very short period of time and the landlord naturally came after the business owner for the rent on the basis of the personal guarantee. Now I don’t know many people who can afford to pay out £18,000 a year for the rest of a lease on a building they don’t want to or can’t occupy. Don’t forget that as well the nice Local Authority only allow six months empty rates allowance so he even had to pay the business rates.

A break clause in the lease after perhaps 3 years would have allowed the business to see if the premises suited them. After three years the owner or business could have given notice to terminate the lease under the break clause if the building was too small, too big or it was simply in the wrong location for their business.

In the situation above the failure to negotiate the lease terms properly may ultimately see the beleaguered former tenant go into personal bankruptcy. A sad end for the business owners dreams. All caused by not seeking the proper advice from a Chartered Surveyor or a good solicitor before entering into his lease.

Assigned Leases - beware

Negotiate hard when taking over an existing lease

I came across a recent case recently of a naïve shopkeeper taking on a lease of the shop he had managed for a national retailer. In the process he failed to take proper and professional advice. The National retailer had failed to maintain the building during the period of the lease and sneakily dumped the lease onto the shop manager by assigning him the lease with just a few years left to run.

Often an assignee doesn’t realise that when they take on an assigned lease that they are taking on the repairing liabilities for the whole of the lease period not just the period left which they have the benefit of. If you take an assignment of a lease with just a few years left to run then as the new tenant you must negotiate a dilapidations settlement with the outgoing tenant. Otherwise the old tenant will walk away leaving the new tenant with an unexpected repair bill of perhaps tens of thousands of pounds.

By negotiating a financial settlement to cover the cost of the repairs that have accrued during the initial period of the lease, the new tenant can at least be certain that he has some of the money tucked away in the bank ready to pay for the repairs and any additional costs at the end of the lease will be for repairs that have been arisen during the period of his tenancy only.

Take proper advice from an experienced Chartered Surveyor before entering into any lease.

Woodworm or Common Furniture Beetle

I had almost finished inspecting the roof structure of a bungalow recently when I thought I would just a last look around in part of the roof into which I had to crawl across the joists. Not easy as you get older and have gained a few pounds around the middle.

A lucky find perhaps because the only visible evidence was this one small piece of timber. It’s fairly unusual to find live woodworm in a modern property. This bungalow was built c 1950 and was habitable. The roof void was well insulated, dry and in good condition apart from these small holes and the tell tale sawdust. Most live woodworm is found in warm damp locations so finding it in a dry cool roof void is not so commonplace.

A salutary lesson maybe to Surveyors and less experienced Home Inspectors to check and check again because had my clients found after they had bought the property I could easily have been asked to answer a few interesting questions.

Dilapidations _ Understand your lease laibilities

Why a tenant should always take advice from a surveyor

It never ceases to amaze me the number of commercial tenants who do not understand the repairing liabilities of their lease. Frequently, in fact in 95% of the cases where we prepare a Schedule of Dilapidations for a landlord, the tenant does not understand what their liabilities have been during their lease. In many case the tenants have never even read their lease.

It is then very important to spend time before signing a lease to have a Schedule of Condition prepared. This can be attached to the lease to set a benchmark of the condition of the building at the start of the lease. Not having a Schedule of Condition could mean the tenant may have an unlimited liability for repairing the building.

In many cases tenants tell me the building was in poor condition when they took the lease on why should they then have to repair and decorate the building at the end of the lease. In 99% of cases it’s very simple it’s because that is what the lease says you are would do.

I have never seen a Full Repairing and Insuring lease that does not contain a covenant requiring the tenant to decorate the inside and outside of the building in the last year or few months of the lease. A reference to the condition of the decorations at the start of the lease is never made. So even if the building is poor decorated when a tenant takes it on they have a liability to hand it back full decorated.

Likewise how many tenants have a repairing covenant in their lease which says to put and keep the building in good repair? A sneaky way maybe of some landlords to get a tenant to repair the building at their expense and to keep it in that repaired condition. A new roof anyone at the tenant’s expenses.

So how can a tenant limit their liability?

Quite simply by employing the services of a Chartered Building Surveyor to prepare a Schedule of Condition of the building at the start of the lease. Make sure the repairing covenants in the lease are amended to record existence of the Schedule of Condition and that the building should be kept in no better repair than that recorded in the Schedule. Yes it may cost up to £1000 to have the Schedule prepared but that will be very small beer compared to a Dilapidation liability at the end of the lease which may run to tens of thousands of pounds.

Tenants frequently take advice from a solicitor before signing a lease but in my experience a solicitor will only provide advice to a specific question. If the tenant doesn’t know the right question to ask then they may never have the repairing liabilities of their lease explained to them.

Save a few hundred pounds at the start of your lease at your peril by not using a good experienced Chartered Surveyor and it will come back and bite you at the end of the lease.