Over the past few years there has been much talk about introducing minimum energy efficiency standards to the private rented sector ("PRS") effectively prohibiting landlords from renting properties which fall below a certain EPC rating (subject to certain exceptions). However, the Scottish Government's Heat in Buildings Strategy is more ambitious, looking at reducing greenhouse gas emissions from all buildings including rented and owned homes.

The current position

As with the majority of properties in Scotland, a residential property will require an EPC at the point of sale or lease. Currently, there are no minimum energy standards applying to residential properties whether rented or owned and no restrictions regarding the type of heating systems which can be installed or operated in them. As part of the journey to net zero, however, the Scottish Government proposes to change that in both the rented and owned residential sectors.

Energy efficiency measures to come?

  • Private Rented Sector (PRS)

The Energy Efficiency (Domestic Private Rented Property (Scotland) Regulations 2020 were due to come into force on 1 April 2020. This would have required all properties in Scotland's PRS to have a minimum EPC rating of E at the start of a tenancy from 1 October 2020, and to require a standard of D from 2022. However, the decision was made by the Scottish Government not to implement these regulations at the time due to COVID-19.

The Scottish Government now proposes to introduce regulations requiring all PRS properties to reach a minimum standard equivalent to EPC rating C on a change of tenancy from 2025, with a backstop date of 2028 for all remaining properties in the PRS to reach an EPC standard of C. Exceptions will be made where it is not technically feasible or cost effective to reach this standard. (There were previous proposals to introduce a standard of EPC rating D by 2025 but these will not be taken forward.)

  • Owner occupied homes

There are also proposals to introduce new regulations between 2023 and 2025, which will require owner-occupied homes to meet EPC band C on the same basis – i.e. by a certain date on the occurrence of a trigger event, likely a sale (but triggers could also be major refurbishment or replacement or installation of a new heating system); with all houses being required to achieve the same rating by a later longstop date. Again, there will be exceptions where it is not technically feasible or cost effective.

The long-term aim is for all domestic owner-occupied buildings to be EPC rating C by 2033. Regulations in this regard are expected this year.

  • Households in fuel poverty

The Scottish Government have also put forward plans to prevent poor energy efficiency from contributing to fuel poverty, by setting targets for improving energy efficiency standards for households in fuel poverty to the equivalent of EPC C by 2030 and EPC B by 2040.

The move to greener heating systems

The Heat in Buildings Strategy proposals include a requirement for all homes (including owner-occupied) to switch to zero direct emissions heating systems by a backstop date in 2045.

As part of this strategy, they propose (subject to technological developments and decisions by the UK Government relating to reserved matters) to phase out new and/or replacement fossil fuel boilers in "off gas" areas from 2025 and in "on gas" areas from 2030. They propose instead that a zero-emissions heating supply is installed – e.g. electricity, heat pump, biomass boiler or hydrogen.

The Scottish Government have also confirmed they propose introducing regulations which will mean that new build properties (those for which a building warrant is sought from 2024 onwards) will need to have a zero direct emissions heating system; the installation of gas boilers will be prohibited.

Scotland's houses need to be part of the net zero journey and we can expect regulations to be introduced to support this aim from this year.

Contributors

Clare Dunlop

Senior Associate

Catherine Reilly

Director of Knowledge & Innovation (Real Estate)