Non-Domestic Energy Performance: the rules revisited

Our clients are often confused about what energy performance laws mean for them. Property owners know that they will need an Energy Performance Certificate but are frequently unsure what else they need. We take a fresh look at some of the rules for larger buildings:-

 Large non-domestic properties in Scotland have been subject to new Energy Performance rules since September 2016. Nearly ten years on, some landlords/owners are unsure if they need to follow the additional rules .

Property owners often seek out exemptions wherever possible. But compliance with the legislation needn’t be as costly or as time consuming as many people think.

What rules apply?

Since 1 September 2016, all non-domestic buildings in Scotland with a floor area over 1,000 square metres must have an Action Plan to improve their energy efficiency.

I already have an Energy Performance Certificate. Isn’t that enough?

No. The EPC regulations have been around since 2009 and require certificates to be made available to potential purchasers or tenants. Your certificate has 2 columns: the “current” rating, and the “potential” rating. The Action Plan is a way of moving your property from column 1 to column 2. The Action Plan is separate from any potential improvement measures listed on your EPC.

My property is already pretty energy-efficient. Do I still need an Action Plan?

 An Action Plan does not need to be provided in respect of any properties where any of the following apply:-

• The floor area is less than 1000 square metres; or
• The property has been subject to a “green deal” improvement plan; or
• The property complies with current building regulations as from 4^th March 2002 onwards (i.e. there is a Completion Certificate dated 4 March 2002 or later); or
• The building is being sold or let before construction has completed; or
• The proposed transaction is a short-term letting for less than 16 weeks and the property has not been let during the preceding 36 weeks.

How do I know what will improve the energy rating?

The Action Plan must be made by an approved surveyor, known as the “Section 63 Adviser”. The Section 63 Adviser can only suggest improvements which are from the following list:-

1. Installing draught stripping to doors and windows
2. Upgrading lighting controls
3. Upgrading heating controls
4. Installing an insulation jacket to a hot water tank
5. Upgrading low energy lighting
6. Installing insulation in an accessible roof space
7. Replacement of a boiler

Sounds expensive. Won’t I be out of pocket?

 In the case of items 1 to 6, the improvement only needs to be carried out if the cost of doing so would be offset by the cost of energy consumed at the property within the next 7 years. So if the resulting saving on your utility bills over the next 7 years is less than the cost of doing the works, you don’t have to do them.

In the case of boiler replacement, this can only be recommended where the boiler is over 15 years old. As this equates roughly to the lifespan of a modern boiler, it is likely the work may soon need carried out in any event.

Do I have to carry out the works as soon as the plan is in place?

 Once the measures are identified, the property owner has two options:

• Carry out the recommended works within 42 months of the Action Plan being issued; or
• Implement “Operational Ratings Measures” instead.

How do Operational Ratings Measures Work?

 Operational Ratings Measures allow for the energy performance of the property to be monitored on an ongoing basis. A Display Energy Certificate must be affixed to the property at all times, and each certificate is only valid for 12 months.

Why would anyone go to the expense of carrying out improvements when they could monitor the energy performance instead?

 The improvements can only be those specified in the list above, and could potentially be as straightforward as switching to energy-efficient lightbulbs. The alternative scenario means that you have to commission a fresh Energy Performance Certificate every year. As soon as the Display Energy Certificate is more than 12 months old, you would then have to carry out the works in any event.

When do I need to decide?

The Section 63 Adviser should consult with you before finalising the plan. The finalised plan should specify whether improvements are being carried out, or Operational Rating Measures followed.

What happens if I do not have an action plan?

In the event of failure to produce an action plan when requried or to have implemented relevant improvement measures, an enforcing authroity can issue a penatly notice requiring a fixed fine of £1,000

Can I switch to Operational Ratings Measures later on?

Yes, but only if a Display Energy Certificate is put in place within 12 months of the Action Plan being finalised and the Display Energy Certificate has continuously been valid (i.e. no more than 12 months have elapsed without a subsequent certificate being put in place).

Are the rules the same in Scotland and England?

No. The new energy performance regulations in England and Wales specify that certain properties must have a minimum EPC rating. Scotland does not have any minimum rating and, if you choose to operate Operational Ratings Measures, there is no immediate obligation to improve a poor rating (although you would have to incur annual costs in obtaining Display Energy Certificate).

Are there any changes to the rules on the horizon?

Not currently. However, although Operational Ratings Measures can run on indefinitely (so long as the Display Energy Certificate is never more than 12 months old) there may come a time when the government decide to put a time limit on this, or to introduce minimum ratings as in England and Wales.

For further information on the effect of the Assessment of Energy Performance of Non-Domestic Buildings (Scotland) Regulations 2016, please do not hesitate to contact a member of the Gilson Gray Real Estate team.

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The information and opinions contained in this blog are for information only.  They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice.  Before acting on any information contained in this blog, please seek solicitor’s advice from Gilson Gray.