By Gordon Black and Alan Maxwell, project management and building consultancy, CBRE Scotland
With continued and increased focus on sustainability, our clients are evermore focused on building energy ratings when considering transactions. With clients typically more familiar with the MEES scheme in England and Wales, it is important that we can advise them with regards to relevant Scottish Legislation.
In England and Wales the Minimum Energy Efficiency Standards (MEES), introduced in 2018, require that any property, including non-domestic/commercial, must meet a minimum energy standard in order to be sold or leased, including lease renewals. The MEES regulations mean that it is unlawful to let properties with an Energy Performance Certificate (EPC) rating below an ‘E’ rating, with this due to increase to a minimum ‘B’ rating by 2030.
However, the MEES regulations do not apply in Scotland, and this can often cause confusion for clients and colleagues outside of Scotland.
In Scotland the Climate Change Act Scotland 2009 (Section 63) and The Assessment of Energy Performance in Non-Domestic Buildings (Scotland) Regulations 2016 are the relevant legislation, requiring building owners to improve energy efficiency and reduce carbon emissions across non-domestic/commercial buildings. There is no minimum EPC rating when selling or leasing a building with a floor area over 1000m² in Scotland (unlike in England and Wales), with the approach instead based on demonstrating equivalence with the 2002 Scottish Building Regulations or later.
An EPC is required for all non-domestic properties on construction, sale or lease and must be produced by an accredited non-domestic energy assessor (such as CBRE). EPCs are valid for ten years and can be re-used within that period where required.
Section 63 Key Points
- Section 63 legislation only applies to the sale or lease of buildings in Scotland.
- It only applies to buildings or areas/floors of buildings which are over 1,000m² (10,764ft²).
- An EPC for the building must also be provided, with it noted that any EPCs produced after 2016 will identify whether the building meets the 2002 standard or requires further assessment (commonly known as a Section 63 assessment).
- When required a Section 63 assessment will be undertaken with improvement measures identified and an Action Plan produced.
- Typical improvement measures may include low energy lighting, improved lighting controls, increasing insulation levels, more efficient heating/cooling systems, low and zero carbon technologies (e.g. solar photovoltaic panels) etc.
- If improvement measures are undertaken a new EPC can be produced to demonstrate compliance with Section 63.
- Otherwise, the Action Plan will identify recommended measures to achieve compliance, with these to be undertaken within a 42-month period.
- The EPC and Action Plan should be in place prior to negotiations.
- EPCs and Action Plans must be made available free of charge to prospective buyers or tenants, with the most up to date version to be provided.
- If improvement works have not been completed prior, with new EPC or an Action Plan provided, sale or lease fines can be implemented.
Deferring Section 63
If the building owner does not wish to complete the improvement measures to achieve compliance within 42 months, they can defer the improvements by lodging a Display Energy Certificate (DEC). The DEC provides information on the building’s actual metered energy use and associated carbon emissions and must be lodged annually until the improvements are carried out and completed. If the building owner fails to complete the improvement measures within the stipulated time frame fines may be implemented.
EPC Rating Differences
It is important to note that due to differences within the EPC rating systems and nuances in the calculation methodologies, EPC ratings in Scotland and England and Wales may not always be equivalent, with a ‘C’ rating in England not necessarily translating to ‘C’ rating in the Scotland.
Differences in the rating for an identical building in Scotland and England must be established through full EPC calculations, as whilst it is typical that a poorer EPC rating will be achieved in Scotland this is not guaranteed. It cannot be said for example that a ‘D’ rating in England would translate to an ‘E’ rating in Scotland as this would not necessarily be the case.
Where a client has properties in Scotland as well as England and Wales it is important that they are aware that there are differences in the system, ensuring compliance with the relevant legislation and not assuming the EPC rating systems are equal.
There are situations where buildings are exempt from Section 63 as below:
- Buildings which have a floor area of less than 1,000m² (10,764ft²).
- Buildings which meet or exceed the equivalent energy standards of the 2002 Scottish Building Regulations (this can include older buildings where energy improvement measures have been implemented).
- Temporary buildings with an intended life of two years or less.
- Workshops and agricultural buildings that meet the ‘low energy demand’ rule.
- Prisons and young offenders institutions.
- Buildings participating in the Green Deal scheme.
The next steps for the MEES legislation in England and Wales have been progressing, with the minimum EPC rating for buildings due to increase to a ‘B’ rating by 2030.
The next steps and development of legislation in Scotland is still to be confirmed with it likely to either revise the Section 63 approach to require further improvements, set minimum standards (similar to MEES approach in England and Wales) or adopt an operational ratings approach (using the actual performance of buildings, through monitoring energy use and resulting emissions as the basis for regulation).
Consultation is ongoing through a number of forums, with the Scottish Government Heat in Buildings Strategy noting that consultation regarding regulatory approach is intended to take place in 2022, with an intention to introduce regulations by 2025.
The Engineering Consultancy team in Scotland is ideally placed to provide expert advice in regard to Section 63 compliance as well as assistance in undertaking EPC/Section 63 assessments and developing design solutions to improve building energy performance to achieve and exceed legislation requirements.