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Energy Performance - The Scottish Proposition

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Energy Performance - The Scottish Proposition

Energy Performance - The Scottish Proposition

You may well have heard about the new Regulations which will be coming into force in England and Wales in 2018.

Us Scots are slightly ahead on this front as the Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 (slightly wordy title!) came into force on 1 September 2016 following the Scottish Government’s commitment to improve energy performance and reduce emissions in respect of non-domestic buildings.

From 1 September 2016, under the new regulations, all owners of non-domestic buildings sold or leased in Scotland with a floor area exceeding 1,000 square metres (10,763.9 square feet), must produce a valid EPC and prepare and produce an “Action Plan” (AP) at the point of marketing to any prospective buyer or tenant.

Do the Regulations apply to all properties?

Many properties, whether sold or leased, are exempt from the new Scottish Regulations. The Regulations don’t apply to:

  • Buildings with a floor area of 1,000 square metres or less
  • Buildings which have been constructed in accordance with a building warrant applied for on or after 4 March 2002
  • Buildings to which qualifying energy improvements have been (at any time) carried out under a Scottish government funded “Green Deal” repayment plan
  • Buildings which do not currently need an EPC and are exempt from obtaining one under regulation 4(a) of the Energy Performance of Buildings (Scotland) Regulations 2008. An EPC is not required for:
    a) temporary buildings (with a planned time of use of two years or less)
    b) workshops
    c) non-residential agricultural buildings with a low energy demand
    d) stand-alone buildings with a total floor area of less than 50 square metres which are not dwellings
  • Lease renewals
  • A single short-term lease where the term is less than 16 weeks
  • Buildings that were marketed before 1 September 2016 and continue to be marketed without any breaks
  • Buildings sold or leased before the construction has completed

If none of the above exemptions apply, the property will be subject to an assessment under the new Regulations and an AP will need to be prepared.

Implementation

The AP is instructed by the owner of the building and is prepared by a “Section 63 Advisor”- an assessor who has demonstrated competence in the assessment procedure in terms of the legislation. Using the data from the EPC, the AP identifies areas for improving the energy performance of the building and what improvement measures need to be carried out to bring the building up to the required standard. The Section 63 Advisor will calculate improvement targets for the building using the following seven prescribed measures:

  • Draught-stripping windows and doors, to reduce heat loss from unwanted ventilation
  • Upgrading lighting controls to include occupancy or photoelectric sensors, if absent
  • Adding central timer controls to the heating system, if absent
  • Adding insulation to any hot-water storage cylinder present, if uninsulated
  • Improving lighting, replacing low efficiency incandescent lamps where present
  • Improving insulation in poorly insulated roofs, where roof space is accessible
  • Replacing the boiler if it is older than 15 years

If no improvement targets are required, the AP is recorded accordingly and lodged with the Scottish EPC Register.

If improvement targets are required, they would only need to be implemented where energy savings over a period of seven years would exceed the cost of the works required to bring the property up to standard. For identified improvement targets that need to be implemented, the owner has the option to either carry out the works or monitor and report energy use annually. If the owner chooses to carry out improvement works they must be completed within 3.5 years of the AP being agreed.

If the owner chooses to monitor and report emissions, they must annually report energy use by producing a Display Energy Certificate (DEC) (which records actual emissions and use of energy) until such time that the improvement works have been completed. The owner will incur annual costs in the production of a DEC and the owner must display the DEC at the property.

The owner’s decision on how they wish to proceed will be recorded on the AP and the AP (and DEC, if applicable) will be stored on the public Scottish EPC Register.

What happens if you ignore the Regulations?

The Local Authority can issue a fixed penalty of £1,000 for non-compliance with the Regulations.

Also, if the owner chooses to monitor emissions and they do not renew the Display Energy Certificate on an annual basis, as a penalty, the owner will be required to carry out the works noted in the Action Plan.

How does it compare with life south of the Border?

The position in Scotland is much less stringent than the upcoming changes south of the border. In England, under the new Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, any new leases from 1 April 2018 will have to obtain a minimum “E” energy rating and from 1 April 2023 it will not be possible to continue to let a non-residential property unless it achieves the minimum threshold. There are no such restrictions in Scotland where a landlord is permitted to let a property even if it has a low energy rating. However it is worth bearing in mind that in future the Scottish Government’s stance is more likely to be in line with the upcoming position in England.

Things to consider

As an owner of a building who proposes to sell or lease their premises, and assuming your property is affected by the Regulations (and not exempt under the above list), the first thing to consider is whether the building has a valid EPC and whether the data within the EPC has sufficient information for use in the Action Plan. An EPC in Scotland is valid for 10 years and, unlike the position in England, an EPC does not need to be updated if any alterations are carried out during that period.

If you’re buying a property, the responsibility under the new Regulations will fall to you as the owner and therefore you must consider the cost of carrying out the works and the cost of monitoring emissions when negotiating the price.

If you’re taking on a new lease as tenant, the results of the Action Plan may give you leverage to negotiate the rent or other lease terms.

If you’re buying a property with a sitting tenant, or you are a landlord entering into a new lease, as landlord, you must ensure that you have reserved a right of access in the lease to carry out works in the future, as necessary to comply with the Regulations. Further, although the owner/landlord is responsible for complying with the Regulations, the landlord and the tenant can enter into a contractual agreement in the lease – this will dictate who will be responsible for the costs in carrying out improvement works or monitoring emissions.

Further information and guidance on the new Regulations can be found of the Scottish Government’s website.

If you have any queries on the Regulations and how they apply in Scotland please contact Shabnam Hanif.