EPC Action Plans: New energy efficiency obligations for landlords/sellers in Scotland – now in force!
A reminder that the Assessment of Energy Performance of Non-domestic Buildings (Scotland) Regulations 2016 imposing new obligations on owners of non-domestic buildings to assess and improve energy performance efficiency are now, as of 1 September 2016, in force.
Click here for a link to our initial LawNow on this topic.
QUALIFYING PROPERTIES
The Regulations will apply only to larger non-domestic buildings, or parts of buildings designed or altered to be used separately, which have a minimum floor area of 1000 m² and which were not constructed in accordance with a building warrant applied for on or after 4 March 2002. When determining whether your building meets the 2002 cut off, it is important to note that the date of the building warrant is the key indicator (as opposed to simply looking at the date of construction). For example, a building completed in January 2004 may have been built pursuant to a building warrant granted in January 2002. In this case, the building would be caught by the Regulations as it would not meet the standards applicable from 4 March 2002. Your surveyor will be able to provide accurate guidance for your specific property.
QUALIFYING EVENTS
Like EPCs, the trigger event for producing an Action Plan is making a qualifying property available for sale or lease. Owners of affected buildings will need to obtain the Action Plan before marketing the property in order to make it available to prospective buyers/tenants.
The intent of the Regulations is to capture situations which would result in creation of a new lease. Lease renewals/extensions are exempt from the Regulations and, similarly, an assignation of existing lease will not be a trigger.
ACTION PLANS
The Action Plan will identify physical improvements required to reduce energy consumption and greenhouse gas emissions.
Once the Action Plan has been produced and registered in the Scottish EPC Register, what does the owner need to do next?
- The owner will have 42 months to complete the improvements; OR
- If the Action Plan includes a statement that the owner has elected to implement operational ratings measures, then the owner can opt to defer the carrying out of the works by (i) monitoring and reporting annually on the operational energy ratings of the building and (ii) exhibiting a Display Energy Certificate (“DEC”). DECs are only valid for 1 year and must be renewed before expiry to allow deferment to continue. The Scottish Government has commented that this option does not remove the need to carry out the works and that it may be withdrawn on future review of the Regulations. It is therefore worth considering option 1 as a longer-term solution.
On completion of the works, owners are obliged to obtain and register a new EPC and Action Plan.
PRACTICAL ISSUES
- When entering into lease transactions, parties should consider who will carry out and/or fund improvements. We will then work with you to make specific drafting in the sale/lease documentation to match your commercial agreement.
- For sales which trigger the requirement for an Action Plan, parties should consider whether existing reserved rights in any occupational leases are wide enough to allow the carrying out of works and/or compliance with reporting requirements.
- For multi-let properties, although individual units may not be caught when leased (due to being less than 1000 m²), landlords should consider whether a future sale of the building/development as a whole would trigger the obligations. In this case, provision for the Regulations should be built into new leases to future proof your asset for sale.
If you think your property may be impacted, please contact us for further guidance.
