Are you based in Scotland? Do you own a commercial property or a property unit more than 1000sqm in size? And are you thinking of selling or creating a new lease? If so, you’re probably subject to Section 63 legislation.
Most commercial property owners will already be aware of the legislation. For most, it’s just background noise until the time comes to sell or lease. Then, suddenly, it’s something they need to know all about.
Information isn’t hard to come by. The problem is that it’s pretty scattered, and not always complete.
There’s a lot of information out there about getting assessments done and formulating action plans. But it’s harder to find information about what you’re being assessed on and why that matters.
Here, we address those missing areas.
Explaining Section 63
The term ‘Section 63’ refers to Section 63 of the Climate Change (Scotland) Act 2009 — The Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016.
Essentially, it’s about improving energy efficiency in and decreasing carbon emissions from commercial buildings.
Step one is an Energy Performance Certificate (EPC), which owners/landlords of commercial buildings/building units have to provide to prospective buyers or tenants.
If there’s an existing EPC, it will have determined whether a Section 63 assessment and action plan applies. If it does, there’s probably one already in place. If there’s no existing EPC, an EPC assessment will show whether Section 63 applies.
Application and exemptions
In general terms, as we’ve said, Section 63 applies to owners of commercial buildings or building units with floorspace of more than 1000sqm, who are intending to sell the building or create a new lease.
The definition of ‘owner’ can be flexible. For example, where a lease gives responsibility for statutory regulations to tenants, they might be considered as owners for the purposes of Section 63.
Section 63 does not apply if:
- You’re extending or altering an existing lease, or if your tenant is assigning the lease to a new tenant
- Your building is exempt from EPC regulations, meets energy standards equivalent to 2002 building regulations or has already been improved through the Green Deal
- Sale or lease is transacted before construction is complete
- Leases are for 16 weeks or less, with no provision to extend within a 12-month period
- The building is temporary and likely to be in place for two years or less
- The building is a workshop or non-residential agricultural building
Once you have your EPC, you’ll know if you need a Section 63 assessor. This may be the same person or company that carried out your EPC assessment. They must be registered with a Scottish-approved organisation, like the Scottish EPC register.
The assessor or adviser creates a Section 63 Action Plan – in some cases this simply states that no action is needed — there’s more on that below.
How assessment works
Section 63 assessments are calculated against the presence, absence or effectiveness of seven set criteria:
- Draught-stripping on windows and doors
- Occupancy or photoelectric sensors on lighting
- Central timers for heating
- Insulation on hot-water storage
- Energy efficient lighting
- Roof insulation
- Age of boiler
Not every criterion will apply to every building. You can’t be expected to improve roof insulation, for example, if you can’t access the roof space.
Every assessment results in an action plan. As a rough guide, these come in three categories:
- No action necessary
- Prescriptive action plan, based on the measures from the assessment
- Alternative action plan — voluntary, created where the prescriptive measures wouldn’t be cost-effective or achieve the desired results
Once your action plan has been created, your assessor will lodge it within the Scottish EPC Register. It must then be made available, free of charge, to all prospective buyers or new tenants.
Once your assessment is complete and your action plan is lodged with the Scottish EPC Register, you have two options: immediate implementation or deferral.
If you choose to start improvements straight away, you - or the building’s new owner - will have three and a half years (42 months) to complete them.
You can choose to defer implementing an action plan if you select the ‘operational route’. That means posting a display energy certificate (DEC) in your building or unit every year.
In the first year, the DEC estimates energy consumption and emissions. Every year after that, it records actual measurements. The idea is to encourage the reduction of both. There’s no time limit on deferral, but it’s not a replacement for implementation — that’ll have to be done eventually.
Every assessor has their own rates and fees, and the cost of works will depend on what’s needed and who are carrying them out. As a rough guide:
- If you’re beginning with an EPC assessment, the cost will vary according to the size of your property. It could start from around £100, and go up to £1,000 or more. There may also be an additional cost to register the EPC once it’s been completed. 4
- Section 63 Assessment costs start from around £350 and again may vary according to the size of your property.
In terms of indirect costs, it’s worth noting that the price of your building, or the value of the lease, could be affected by the recommendations in the action plan. And if you don’t comply with the legislation, you could be facing fines of £1,000 from your local authority.
It’s important to remember, that this guide is no substitute for ongoing advice from a trusted expert. So if you have any questions, worries or doubts, it might be worth contacting a specialist Section 63 adviser or assessor.