Most, if not all, owners of commercial property will by now be familiar with the obligation to produce an Energy Performance Certificate (EPC) when marketing to a prospective buyer or tenant.
While the rules have been in force since 2008, they have been subject to significant amendment – and they are not always clear in scope. They also represent a clear divergence in a number of respects from the position in England & Wales, so it is worth taking the opportunity to summarise some of the key provisions.
An EPC need only be obtained and exhibited when a property is to be sold or let – although the regulations don't cover sales or leases before construction of the building is complete. Nor do they include renewal of an existing lease to the same tenant - and it's generally considered that assignations of leases are excluded also. The position on sub-leases is not clear.
A person becomes a prospective buyer or tenant on the earliest of the dates when they request any information about the building or make a request to view it, in either case for the purpose of deciding whether to buy or lease or when they make an offer (oral or written) to buy or lease. So the EPC should be prepared and ready for exhibition at the outset of the marketing process – it needs to be produced within 7 days of the requirement kicking in.
Unlike in England and Wales there is no prohibition on selling or letting properties with an EPC rating below a specific level – although there is anecdotal evidence of some lenders who have failed to appreciate the distinction north and south of the border.
However, since 2016 the Scottish Government has required action on the part of an owner of subjects above 1,000 sq m in floor area – (the regulations refer to "building or building unit" and so cover sales or lettings of part only of buildings which surpass this area).
The requirement (which again only kicks in on marketing for sale or lease) is to prepare and provide – in addition to the EPC – an Action Plan, prepared by a specialist and containing a list of prescribed improvement measures. The owner must then decide whether they elect to carry out those works (which they must then do within 42 months) or instead to elect to implement an "operational rating measures" regime by displaying a "Display Energy Certificate" at the property – recording total CO2 emissions and operational ratings over the previous three years - and renewing and registering this annually. The theory is that energy and emissions reductions can be delivered through behavioural change as well as by building improvements.
There is a number of exemptions – probably the most important of which is for subjects which have been constructed in accordance with 2002 building regulations – these are deemed to be sufficiently compliant with energy performance requirements so no Action Plan is required for these buildings.
These rules are considered to be a first step in regulating for the improvement of non-domestic properties and we expect further development of the regulations as time progresses.
This is very much a broad summary of the relevant provisions. Please contact Laurence Douglas or your usual Brodies contact if you require further information.
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