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EPCs and listed buildings 18 August 2014

It is at last time to tackle the thorny question of whether EPCs are required for listed buildings, if for no other reason than that landlords of listed buildings will need to know whether the Minimum Energy Efficiency Standard (MEES) will apply to them.  Currently there is, shall we say politely, confusion over the issue.

A recent issue of Estate’s Gazette contained a half-page advert for a “Hotel, Spa & Estate” in St Austell, with a guide price of £7.5m.  What caught my eye was the phrase “EPC Exempt”.

The hotel was not named, but a little research on the web identified it as the Cornwall Hotel, Spa & Estate in Tregorrick (a good Cornish name).   Its website tells us that the main building is called the White House, and this is mentioned by name on the English Heritage website of listed buildings in Cornwall.  It all began to make sense.  This is a listed building – so, people say, it must be exempt from the need for an Energy Performance Certificate (EPC).  But it is not quite so simple …

There is a widespread belief that listed buildings are exempt from the requirements for EPCs.  EPCs are required to be prepared, by EU law, when a building is being sold or let.  They rate a building’s theoretical energy performance on a scale from A (best) to G (worst), rather like a fridge.

The EU directive was “re-cast” a couple of years ago, and changes were made to the relevant regulations that implement the EU law in England and Wales (the Energy Performance of Buildings (England and Wales) Regulations 2012).   So far as possible, the regulations simply repeat the wording in the EU directive, to avoid any criticism that they have not been implemented correctly (we have seen a few examples of this in the past, and the EU Commission has had to crack down on the UK Government). 

The regulations contain one particularly odd provision.  Regulation 5(1)(a) states that EPCs are not required for:

“buildings officially protected as part of a designated environment or because of their special architectural or historical merit, in so far as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance” (emphasis added)

Unfortunately no-one can actually explain what the wording in italics means.  It has been transcribed verbatim from the English version of the relevant EU directive.   Simply copying it out avoids any allegation of “gold-plating” in the regulations (ie requiring more than the EU requires – anathema to the coalition government), and also avoids the risk of getting it wrong.  However, in this instance it has the pretty serious disadvantage that now no-one can understand what the law is.

What are these energy performance requirements that have to be complied with?  Part L of the Building Regulations?  The MEES regulations, which are not coming into force until 2018?  Given the uncertainty as to what is meant, I think there has to be an argument that the effect of the wording in italics is that listed buildings are generally not exempt from the need for EPCs.  Equally, one can concoct an argument for saying that, given that the wording in italics is meaningless (in context), it should be ignored, and therefore listed buildings are indeed exempt from the need for EPCs, as the Government intended. 

Whichever is correct, the hard-working people of Britain (© all politicians) are entitled to better drafting of regulations than this gibberish.

Official advice

The advice on various official websites as to whether or not an EPC is needed for a listed building ranges from correct-but-incomprehensible to succinct-but-arguably-wrong. 

For example,the current guidance on selling your house on the gov.uk website includes in the section “Buildings that don’t need an EPC” the bald phrase “listed buildings”.

I have also just looked, today, at “A guide to energy performance certificates for the construction, sale and let of non-dwellings“, which is a PDF document produced by DCLG in December 2012.  In relation to listed buildings, it merely repeats the wording of the statutory instrument when it explains that the following buildings are outside the scope of EPCs:

“buildings and monuments officially protected as part of a designated environment or because of their special architectural or historic merit in so far as compliance with certain energy efficiency requirements would unacceptably alter their character or appearance”

The relevant page of the English Heritage website is less ambiguous.  In fact, it’s extremely definite (albeit possibly wrong), saying:

“An Energy Performance Certificate (EPC) is a legal requirement when building, selling or renting a property. However, there are exemptions for certain types of building and  since January 2013 listed buildings have been exempted from the need to have an EPC.”

What did the Government intend?

The Government’s “impact assessment” relating to the re-cast EPC Directive used the number of listed buildings in England and Wales to try to estimate the savings that would be made by removing “buildings and monuments officially protected as part of a designated environment or because of their special architectural or historic merit …” from the scope of EPCs.  So it seems pretty clear what the Government’s intention was. 

If we assume that no-one can satisfactorily explain what the second part of the phrase actually means (and I certainly cannot explain it), does that mean that the owner of a listed building can safely sell it or grant a lease without commissioning an EPC?  After all, commissioning an EPC for a listed building is likely to be far more expensive than for a standard building. 

The pragmatic answer is that failure to produce one is unlikely to result in enforcement action, so the owner might be willing to take the risk (and the buyer, or tenant, is of course not taking any risk).  The EPC regulations are generally not enforced with any great vigour.  And if a trading standards officer decided to take some action, if only to encourage others to comply, it’s pretty unlikely that he or she would start with a listed building, where everyone knows there is confusion.  An agent, on the other hand, might baulk at marketing the building with no EPC – although the Estates Gazette advertisement mentioned at the start of this article suggests that some agents are happy to adopt the view that listed buildings are exempt from the need for an EPC full stop.

So we are left with the embarrassing likelihood that the Secretary of State (or at least the Parliamentary Under Secretary of State on his behalf) signed into law the Energy Performance of Buildings (England and Wales) Regulations 2012 without having any idea what regulation 5(1)(a) actually means.  And if he isn’t embarrassed, then he ought to be.

A possible explanation

After researching this article, I became convinced that there must be an error in the UK regulations – even though the words have been literally transposed from one document to the other.

And here is my conclusion.  The offending provision has been taken entirely out of context, and included in the regulations inappropriately

Article 4 of the Directive is headed “Setting of minimum energy performance requirements” and starts “Member States shall take the necessary measures to ensure that minimum energy performance requirements for buildings or building units are set with a view to achieving cost-optimal levels.”

Article 4(2) then contains some exceptions, as follows:

“Member States may decide not to set or apply the requirements referred to in paragraph 1 [ie minimum energy performance standards] to the following categories of buildings:

“(a) buildings officially protected as part of a designated environment or because of their special architectural or historical merit, in so far as compliance with certain minimum energy performance requirements would unacceptably alter their character or appearance;”

In this context, it makes sense – but note that such buildings are still required to comply with minimum energy performance requirements where those requirements do not unacceptably alter the buildings’ character or appearance.

Articles 11 and 12 cover the requirements for EPCs.  Article 12(6) says that

“Member States may exclude the categories of buildings referred to in Article 4(2) from the application of paragraphs 1, 2, 4 and 5 of this Article.”

So what the UK regulations should have done is to exclude from the need for EPCs a category of building (ie listed buildings).  Including the “insofar” bit at the end was entirely inappropriate. 

And, it seems, counter-productive.  My unexpected conclusion is that under the Directive it is indeed permissible for “a building officially protected because of special architectural or historical merit” to be excluded from the requirement for an EPC.  However, by injudicious (or sloppy) transposition from the Directive to the UK regulations, the Government has arguably failed to take advantage of the exemption.  As explained above, as a result of the incorrect transposition it is possible to run an argument that listed buildings are covered by the UK regulations and do require an EPC before sale or letting.  There has to be some kind of irony there, although I doubt that David Cameron would appreciate it.  I’m sure that Nigel Farage would, though.

You can decide whether you agree with me by looking at the Directive itself (available through this link):

EU Energy Performance of Buildings Directive (re-cast) (English version)

 

I am grateful to Sue Highmore, an editor at Practical Law, for commenting on the initial version of this article.  I take full responsibility for its contents, however.

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