According to the latest announcement, regulations requiring the non-domestic property owners in Scotland to carry out energy efficiency improvements before they can sell or lease the premises will not be incorporated into the current Energy Performance Certificate (EPC) regime. Instead, the Scottish Government has redrafted the proposal as a separate statutory instrument to implement domestic and EU policy on emissions and energy reduction which fails to set a minimum energy efficiency standard.  

The draft regulations have been produced under Section 63 of the Climate Change (Scotland) Act 2009 and will come into force via the Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 on 1st September 2016. The provisions were borne out of the Scottish Government’s commitment to reduce emissions, known as ‘Action on Carbon and Energy Performance’ (ACEP). This introduced a general requirement to improve the energy efficiency of non-domestic buildings with a floor area of more than 1,000 square metres that are not constructed to 2002 building standards or later. Property owners will be required to assess their greenhouse gas emissions and energy performance and a plan to improve the energy performance of buildings and reduce emissions will be required.

Draft regulations were published in January 2016 which will place on the owners of certain Scottish properties an obligation either:

  • to carry out certain energy efficiency improvement works within 3½ years; or
  • to accept an obligation annually to report energy consumption and to keep a Display Energy Certificate (DEC) exhibited at the property.

The regulations will apply to any commercial building in Scotland with a floor area of more than 1000 square metres (or 10,764 sq ft). The following exclusions will apply:

  • properties that comply with 2002 (or more recent) Scottish building regulations;
  • properties that have benefitted from qualifying energy improvements under a Green Deal plan;
  • temporary buildings intended for use for two years or less;
  • workshops, and
  • properties with low energy demand for example where there is no heat provision.

The property owner must obtain an EPC on sale or rental and undertake a further assessment to identify a target for improvement of the carbon and energy performance of the building. An action plan, set by an assessor, is required to detail the physical improvements required to the property to achieve the target. Once the plan is in place, the owner can choose to carry out improvements and has a period of 3½ years to do the physical work. Alternatively, work can be deferred by instead recording and reporting actual metered energy use via a DEC on an annual basis. Along with the EPC, the Action Plan must be made available to prospective buyers or tenants and the obligation will apply to the owner who commissioned the action plan and to future owners

Improvements can include any of the following:

  • installing draught stripping to doors and windows;
  • upgrading lighting controls;
  • upgrading heating controls, low energy lighting or installing insulation in an accessible roof space – if the payback period of the works is 7 years or less;
  • replacement of a boiler if more than 15 years old;
  • any other works, measures or steps to improve the energy performance or reduce emissions of greenhouse gases associated with the property.

The following are expected to be exempt from the requirements:

  • the renewal of a lease to an existing tenant;
  • the grant of a lease for 16 weeks or less where the property has not been let by the owner during the preceding 36 weeks;
  • the grant of a sub-lease;
  • a sale or lease of a property in the course of construction.

Once in force, the new regulations will be triggered once a commercial property owner wishes to sell the property or grant a lease to a new tenant. Similar rules do not come into force in England and Wales until 1 April 2018 and will not apply to sales. Further explanation is still required and the publication of guidance notes is expected in the coming months to accompany the regulations to clarify the approach. Property owners in Scotland must now take account the requirements for energy efficiency measures when they sell or lease properties from 1st September 2016.

The Scottish Parliament has taken a very different approach to the English requirements. Whilst the compliance requirement encompasses both leasing and sale of properties north of the border, the English regulations only address private rented properties. One common factor is that improvements will be identified which will be through action plans in Scotland and in recommendation reports that accompany EPCs in England. The primary difference is that, in England, all privately rented properties will be required to have an EPC rating of E or above before a new lease can be issued from April 2018.

Whilst the Scottish legislation is due to come into force eighteen months prior to its English counterpart, the requirement to carry out improvements can be delayed indefinitely as long as there is a valid DEC on display. In effect, buildings that are poorly performing will not become sustainably obsolete as is the case in England and property owners may be dis-incentivised to invest in improvement works as a result. It seems that, despite previous assertions that the Scottish Government would take a tougher standpoint than its English counterpart, the revised regulations have provided an escape route which has reduced the burden and is unlikely to deliver results.

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