Energy Performance and Commercial Property — Simplifying the Legal Stuff

Over the last decade, there have been significant changes to the environmental and energy management responsibilities placed on commercial property owners in the UK.

Over the last decade, there have been significant changes to the environmental and energy management responsibilities placed on commercial property owners in the UK.

To make matters more confusing, the regulations in England and Wales are different from those in Scotland. Which means commercial property owners with UK-wide portfolios need to be aware of more than one set of legislation — or at any rate, that they need advisers who have that awareness.

Here’s a quick and simple guide to the differences (and the similarities) between the two systems.

Scotland — Energy Performance Certificates

In Scotland, owners of commercial property have, since 2009, been required to provide an energy performance certificate (EPC) when selling or creating a new lease. There are some exceptions, but in general, the rule applies to all commercial properties more than 50sqm in size.

The EPC gives the property an energy efficiency rating from A to G, with A being the most efficient. It also provides a series of recommended measures for improving energy efficiency, if required. Until 2016, however, there was no obligation on Scottish commercial property owners to act on those recommendations.

Scotland — Section 63 legislation

In September 2016, the Scottish Government added new legislation under Section 63 of the Climate Change (Scotland) Act 2009 — The Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016. It required owners of some commercial properties to follow their EPC with a Section 63 assessment.

In general, the legislation refers to commercial properties more than 1,000 sqm in size, which are up for sale or lease. Once the assessment has been completed, it generates an action plan showing improvement measures for energy and emissions management. The Action Plan can be immediately implemented over three and a half years or deferred by the production of a Display Energy Certificate (DEC).

Provided the action plan is in place, there’s no restriction on the sale or lease of the building to a new owner or tenant. There’s a £1,000 penalty for every failure to comply with Section 63.

England — Energy Performance Certificates

In England and Wales, EPC requirements have been in place since April 2008. As in Scotland, they apply whenever a commercial building larger than 50 sqm is for sale or lease, or when construction is complete. They grade the property from A to G, and offer recommendations for improvement. And as with their Scottish counterparts, they place no obligation on the building owner to take further action.

England — Regulation 27

In April 2018, however, minimum energy efficiency standards (MEES) will apply to all commercial landlords under The Energy Efficiency (Private Rented Property) England and Wales Regulations 2015. They will actively prohibit new, extended or renewed leases on commercial properties with F or G ratings. While sellers will still be able to complete their sales, commercial landlords will have to carry out improvements before they can issue or renew leases.

Fines for non-compliance are also harsher in England and Wales. Landlords renting a Grade F or G properties after April 2018 face fines from £1,000 - £150,000, depending on the rateable value and type of property. Further penalties of £1,000 - £5,000 apply to landlords registering false or misleading information to the exemptions register.

Find expert help

The above is only a simple outline of the differences in legislation across the UK. Commercial property owners are best advised to consult a specialist in such matters to ensure they stay on the right side of legislation. The EPC Register and Scottish EPC Register are good places to start.

 

 



Raj Chall

About the author

Raj Chall is a commercial energy assessor and Section 63 adviser with Scottish Energy Services. Based in Glasgow, the company works with domestic and commercial clients across Scotland.

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