The Scottish Government has confirmed the measures to improve the energy efficiency of existing buildings under Section 63 of the Climate Change Act. Owners of commercial property and property professionals in Scotland should act now to familiarise themselves with the new regulations - which will be effective from 1 September 2016 – as well as their likely implications.
Section 63 of the Climate Change (Scotland) Act 2009 requires the Scottish Government to introduce regulations compelling owners of commercial buildings to assess current energy use in their properties and take steps to reduce carbon emissions. This is part of the wider policy to reduce Scotland’s greenhouse gas emissions by 42% from 1990 levels by 2020 and by 80% by 2050; currently the most ambitious targets in Europe. According to Scottish Government figures, non-domestic buildings currently account for 18% of Scotland’s CO2 emissions.
What is proposed?
Eligible non-domestic buildings must undergo an assessment of carbon and energy performance, the outcome of which is expected be a three part report comprising:
- an Energy Performance Certificate (EPC)
- a Recommendations Report
- an Action Plan for the building outlining targets and proposed improvements
The system for producing EPCs has been up and running for several years now, so it will be the Recommendations Report and Action Plan which will impact most on the commercial property market. The assessment will be carried out in a similar way to the current EPC regime and by accredited professionals however, crucially; the recommendations become mandatory – more on this later. As part of the sale or rental of a property the only duty on the owner is to produce the Action Plan.
Which buildings are affected and when?
The requirement for assessment will come into force on 1st September 2016.
Eligible buildings will include, broadly speaking, all commercial properties, or parts of buildings under separate occupancy, with a conditioned (i.e. heated or cooled) floor area greater than 1,000sq m (10,764 sq ft). Exemption will apply to commercial buildings which:
- Have a conditioned floor area of less than 1,000 sq m
- Are designed and constructed in compliance with the 2002 Building Regulations or later
- Have a limited life of less than 5 years
- Do not use fuel or power to control the temperature of the internal environment
- Are buildings already participating in the ‘Green Deal’
- Certain Crown Estate and MOD properties
Properties which have obtained an EPC certificate within the last 10 years but are otherwise eligible will require only to undergo the Recommendation Report and Action Plan parts of the assessment.
The triggers for the requirement to undertake the assessment will be:
- Rental (to a new tenant)
Lease renewal to an existing tenant is not to be a trigger for assessment.
Implications for Owners
The Recommendations Report will detail physical measures which can be taken to improve the energy efficiency of the building. It will also detail the Operational Ratings on energy performance and carbon emissions which are to be recorded and presented annually.
The Action Plan then details the timescale for implementing the Recommendations Report. Crucially, the building owner will then have the option of whether to carry out the improvement works within the specified timetable of 3½ years OR defer and implement a policy of monitoring, recording and reporting the operational ratings of the building within one year. This involves:
- Record actual metered energy use annually and display a DEC (Display Energy Certificate). This is similar to an EPC but shows actual energy consumption rather than a notional energy performance rating.
- Report actual metered energy use annually to the Scottish EPC Register.
It is important to stress that while owners may be able gain tenants’ co-operation in undertaking improvement works or recording operational ratings it is the owner solely who is liable for compliance and any enforcement measures by the local authority will be against them.
Implications for Consultants
As the trigger for making a property eligible for an assessment is sale or letting, agents and solicitors will need to familiarise themselves with any implications likely to impact on tenants or landlords, particularly when agreeing terms for lease. These are likely to include new lease clauses or agreements to ensure reporting of energy use or access to undertake improvement works.
If you require advice to meet any aspect of the new requirements please contact Mark Friars.