New regulations have come into force in Scotland requiring owners of commercial properties to identify energy efficiency improvements on their properties before they can be leased or sold.
The new rules were introduced on 1 September and apply to non-domestic buildings with a floor area of more than 1,000m2 that are not constructed to 2002 building standards or later. When a property falling under the rules is to be sold or let, the owner must now produce an action plan setting out a programme for the implementation of measures to improve the energy performance and reduce its greenhouse gas emissions.
This plan must be prepared and issued by a qualified member of an approved organisation, known as a section 63 advisor, following an assessment of the energy performance of a building using energy performance data.
This plan will specify what improvements have been identified; include the energy performance and the emissions targets for the building; which measures are recommended to meet these; and whether or not operational rating measures are to be implemented in respect of the building or building unit.
Operational rating measures are those implemented to assess and record the energy consumption associated with the actual use of a building or building unit.
The improvements eligible under the Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations are:
Once an action plan is finalised, the owner can chose to make the improvements with the 42 month compliance period or to defer them by reporting operational energy ratings on an annual basis using a Display Energy Certificate. They must also provide a copy of the plan to the buyer or tenant free of charge.
According to Niall Robertson, associate director at real estate giant Jones Lang LaSalle (JLL), has claimed the addition of a annual reporting stipulation means the legislation may not be as effective as thought during the preceding consultation period.
“There’s been a little bit of dilution over how they would be implemented. They have the three and a half year period to implement any improvements and you have this get out with the Display EPC as your option. That’s probably the biggest get out that commercial property owners have.
“It could have been really significant for the property industry had it not been slightly watered down but that’s not to say it’s not a positive piece of legislation now and at least it starts the ball rolling and we can work towards improving our building stock,” he said.
The rules will be enforced by Scotland’s local authorities, with any failure to provide an action plan to the Scottish EPC Register or implement improvements to be met with a £1,000 fine.
Scotland’s councils are in a similar position to the rest of the UK’s in that funding is often tight from central government. However, according to Robertson the structure of the legislation is that industry will direct itself to comply with a light touch from governing bodies.
“From our clients’ perspective and commercial property owners should consider how this might impact on the sale-ability and value of their assets because clearly when you go to make a sale of your property it’s going to come up in the due diligence that you have a poor EPC,” he said.
“I would anticipate that because of the way it’s been structured that even if the local authority doesn’t have the resource to identify it then it’s something that could impact on sales and lettings.
The only properties to be exempt from the rules are those under construction, on a short lease of up to four months, those that have not been let for three years and those where an existing lease is being renewed with the same tenant.
The new rules were first published in January this year in an attempt by the Scottish government to crack down on emissions. Despite the long lead in, there have been concerns that commercial building owners were unprepared for the new rules.
Property consultancy Tuffin Ferraby Taylor said in May that that around 70% of commercial property owners had not yet drawn up action plans to comply with the new requirements placed on them.
However, some firms have already taken action to fall in line with the regulations, such as The Hub Air Cargo Centre at Glasgow Airport which recently received a £750,000 energy efficiency upgrade.
Similar regulations are due to be introduced in the rest of the UK in April 2018 when minimum energy efficiency standards are placed on leased properties. These will require commercial properties to have an EPC rating of at least E before they can be leased and are expected to affect a fifth of all commercial buildings.
