With the implementation of EPCs next month, boiler inspections could soon be an important issue for owners and occupiers, says Lovells' Simon Keen
Why have boiler inspections suddenly become an issue? The answer is that two recent government initiatives have made them worth considering.
The first is the implementation in England and Wales of the Energy Performance Certificate (EPC) regime, and the second is a government drive to have energy efficiency improved by having boilers and hot water systems inspected and improvements recommended. These are dealt with in turn.
EPC assessments: An obligation to assume the worst
An EPC is, broadly speaking, an assessment of the energy efficiency of a building, not its occupier, and is accompanied by a recommendation report setting out ways in which the energy efficiency could be improved. In order to obtain an EPC, an assessment by a qualified assessor is required. This could be a paper assessment, if sufficient plans and drawings are available to allow the assessor to carry out the assessment from his desktop but, in the case of existing buildings, it is more likely that he will need to carry out a physical survey of the building to prepare an EPC.
Of crucial importance is the fact that, if he cannot see something, the assessor is obliged to assume the worst. If the boiler, for example, is quite old, it is possible that an assessor will have to assume that it is inefficient unless there is evidence to the contrary. This could have a negative impact upon the assessed energy efficiency of the building, and rather than scoring an A (being the most efficient rating) the building could instead score anything down to a G (the most inefficient rating).
The average rating for an existing building in England and Wales, built to current Building Regulations and BREEAM standards, is expected to be about a D. However, if an assessor has to make several negative assumptions about a building then a D could be quite optimistic.
The EPC report: to remedy or not to remedy ...
It is important that owners and occupiers start thinking about the factors that could impact upon their energy rating and whether it is commercially sensible for them to take action to remedy any potential negative impact. The recommendations made in a recommendation report are not binding, but owners/occupiers also need to decide whether or not to implement any of them.
These decisions will, to a great extent, be based upon how the market responds to energy ratings. If the energy rating does not impact upon the capital or rental value of a building then there is perhaps little to be gained by spending money to improve it.
Boiler inspections, whether for EPCs or DECS, owners or occupiers, to pre-empt an assessment or follow up on recommendations, are likely to become more important.
An organisation with a policy of acting in an environmentally sustainable way, or with corporate social responsibility rules may be more inclined to take remedial action. Company directors should consider the impact of the company's operations on the environment, as this is a requirement recently introduced into English law. If a building's energy rating does impact upon its capital or rental value then the cost of any remedial action and any potential increase in value (and any saving on utilities bills) will need to be balanced and a commercial decision reached accordingly.
DECs: the direct impact of boilers
If an owner/occupier is a public authority or institution, then it must also consider whether it is obliged to display a Display Energy Certificate (DEC) at its premises. A DEC, unlike an EPC, is an assessment of the energy efficiency of an occupier, so the efficiency of boilers and other plant and machinery will impact directly upon the energy rating that is given, particularly if they are used wastefully (eg. the heating is set too high, or is left on overnight or during the summer).
Again, an energy assessor will usually need to carry out a physical survey of the building in question, unless good quality plans and drawings are available to allow him to do a desktop assessment, and if he cannot physically inspect something then he must assume the worst about its energy efficiency.
DECs are intended to inform the public, in a transparent way, as to how energy efficient public authorities are. It is, in this context, not likely that energy efficiency will affect any kind of value, but public authorities are often under the additional, political, pressure of needing to impress (and appease) the electorate.
It remains to be seen whether the electorate will place any particular weight upon energy efficiency, but in an era of congestion charges based on CO2 emissions and "green" taxes, public authorities could well consider that they need to be seen to abide by environmentally friendly guidelines and not waste taxpayers' money on unnecessarily high utilities bills.
The joys of a boiler inspection
Has the humble boiler just inadvertently found its way to the heart of property transactions in this brave new, green, world?
Boiler inspections, whether by an energy assessor for the purposes of preparing an EPC or DEC or by an owner/occupier for the purposes of pre-empting an assessment and deciding whether (if at all) to take any action to potentially improve a building's energy rating, are therefore likely to become of increased importance. There is also a further issue to consider in relation to boiler inspections, and although it is not yet legally binding upon any owner or occupier, it is possible that the government may legislate for it in this or the next Parliament.
Buried in the Department for Communities and Local Government's website is a page extolling the virtues of having your boilers inspected. Over 50% of the total energy consumption and CO2 emissions for buildings comes from heating and hot water use. DCLG therefore considers that providing advice to homeowners and businesses about the efficiency of their heating and hot water systems is a vital step to reducing energy costs and CO2 emissions.
DCLG is therefore launching, in conjunction with heating and hot water providers, a new energy efficiency advice programme, which is intended to cover both homes and businesses. The intention is that those installing heating or boiler systems should provide basic advice to end-users about energy efficiency. This will be in the form of a simple checklist, which will be used on inspections to recommend ways in which the system can be made more efficient and will apparently state how much could be saved by implementing those recommendations. They will also produce a short leaflet giving advice on how to maintain an efficient system. This already forms part of industry-recommended good practice guidance. The key factors affecting energy efficiency are the age of the system and how it is used and maintained, but the type of fuel (oil, gas or solid) also has an impact. Boilers will be rated on the familiar A-G scale.
So, how does this apply in practice? These recommendations are not at present compulsory, so they don't have to be implemented by the owner or occupier of a building, and similar commercial considerations to EPCs will need to be considered before deciding whether or not to implement them anyway. However, an owner or occupier will only be able to make this decision if he knows what the recommendations are!
On a new build, for example, particularly of housing, developers should consider passing any advice or recommendations received to the purchasers/tenants. The same logic applies to sales or lettings of older properties with recently installed heating or hot water systems, where advice or recommendations may have been received from the installing engineer and could be passed to new owners or occupiers.
Has the humble boiler just inadvertently found its way to the heart of property transactions in this brave new, green, world? We'll have to wait to see how the market reacts, but its profile has certainly just been raised.
Simon Keen is an associate solicitor in the Real Estate Group at Lovells,