After a long gap, the Scottish Government has recently released the Energy Performance Regulations introduced under Section 63 of the Climate Change Act 2009. There has been much speculation in the commercial property sector as to what the effect of the Regulations will be on property owners.
The Regulations are in addition to the current requirements to provide an Energy Performance Certificate (EPC) on the sale or lease of a building and will come into force on 1 September 2016. At least initially, they will apply only to larger commercial buildings (or units within a building) with a floor area of 1,000 m² or more.
There are also a number of exemptions:
- Buildings that meet energy standards equivalent to those introduced by the 2002 Building Regulations
- Buildings which do not require an EPC
- Buildings that have already undergone improvements via a Green Deal, a government funding mechanism, are also exempted
The Regulations will apply when such a building is sold or leased to a new tenant (but not to lease renewals or short leases of less than 16 weeks) and adopt a different and, arguably softer, approach to that to be introduced in England (where buildings with an EPC rating of F or lower will become unlettable). It is important to note that there is no exemption from these provisions on the basis that a building is listed.
From September, in addition to an EPC, a property owner must undertake a further assessment to produce an energy action plan (EAP) which identifies a programme of measures to improve the carbon and energy performance of the building. The assessment will be carried out by a "Section 63 advisor" who will determine the improvement targets for the building. The targets are set by reference to seven set measures (currently contained in EPCs):
- Installing draught-stripping to windows and doors
- Upgrading lighting controls to include occupancy or photoelectric sensors
- Adding central timer controls to the heating system
- Installing an insulation jacket to a hot water tank
- Upgrading low energy lighting
- Installing insulation in an accessible roof space
- Replacing the boiler if it is older than 15 years
The owner cannot be asked to make any improvements which are not specified on this list. They can however volunteer to make improvements by taking alternative measures in substitution for those on the list. Any improvement measures must (in the opinion of the advisor) be able to pay back the initial cost, through the reduction of energy consumption, within 7 years. This period is extended to 15 years in the case of a replacement boiler. Once the action plan is finalised, the owner can elect either to carry out the improvements, or may defer them by choosing to formally report annual energy use, via a Display Energy Certificate or 'DEC'.
All action plans and DECs are to be accessible on the Scottish EPC register, and, as is the case with an EPC, action plans must be made available to all prospective buyers or tenants. The action plan must be completed within three and a half years, unless it is delayed by obtaining a DEC.
Failure to undertake an EAP or to implement its improvements or display a DEC will result in a penalty charge of £1,000.
While the new Regulations will have an adverse effect on landlords of older large buildings which may have been constructed with dated materials, poor insulation and single glazing, they are not as draconian as some had feared, with landlords being given an extended period to monitor the energy performance of their buildings and implement staged improvements.
More information on Section 63 can be found here.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.