Requirements for property are changing, to reduce emissions, writes Bill Meldrum
Whether in our capacity as property owners or individuals, we can be in no doubt of the responsibility we collectively face to protect our planet for future generations. The Climate Change (Scotland) Act 2009 commits us to reduce greenhouse gas emissions by at least 80 per cent by 2050 and 42 per cent by 2020.
The scale of Scotland’s commercial property sector means it has a considerable role to play in protecting the environment. New legislation from 1 September 2016 will require owners considering the sale or lease of non-domestic buildings to take steps to improve the energy efficiency and reduce the greenhouse gas emissions from their property.
While five months may seem a long way off, now is the time to consider the impact these regulations may have on you or your company.
From September, the Assessment of Energy Performance of Non-Domestic Buildings (Scotland) Regulations 2016 will come in to force. This imposes a duty on the owner of a “building unit”, after obtaining an Energy Performance Certificate (EPC), to carry out a further energy performance assessment. This will identify a target to improve the energy performance of the property, and reduce the greenhouse gas emissions. An agreed action plan will outline steps to carry out any improvements.
The improvements specified in this action plan must be carried out within 42 months of the date on which it is issued. However, the owner may choose to defer carrying out the works by instead arranging to record and report on the energy consumption and emissions via a display energy certificate on an annual basis.
These regulations will affect non-domestic buildings with a floor area of more than 1,000 square metres and which are already subject to the requirement to provide an EPC.
Although the regulations will initially cover a relatively small proportion of all property transactions, it is likely the Scottish Government, to meet its carbon reduction targets, will continue to broaden it to potentially encompass almost all property.
England and Wales has already gone further. Legislation to take effect from 1 April, 2018 in England and Wales will make it unlawful for practically all commercial or residential property to be let without a specified minimum rating. Scotland could very well adopt the same approach.
Notable exemptions include properties which have been built to current building standards, properties already included through a Green Deal and various transactions not caught by the regulations.
This could provide a rush towards the purchase of commercial properties not caught by the regulations, creating a two-tier property market with older, less energy efficient properties suffering a fall in value or even becoming unmarketable.
These regulations will mean that owning or renting “green” property is no longer purely desirable; it is fast becoming a necessity – and will also result in significant energy cost savings for property owners.
Local authorities will be responsible for enforcement of the regulations, with the power to impose a penalty charge of £1,000 for failure to issue an action plan or implement improvements. Some may observe this penalty to be relatively low set against the significant cost for some owners to comply with the regulations. This poses the question as to whether the enforcement provisions lack teeth.
These regulations, on paper, reflect a commitment to the environment and the Scottish Government’s target to reduce carbon emissions. In practice, however, it will be a matter of negotiation between the parties involved in the purchase and lease of commercial property as to who will be liable for the cost of improvements.
It is hard to believe that this will not mark a turning-point for the Scottish commercial property sector in its move to greener working practices.
• Bill Meldrum is a senior associate and head of commercial property at Murray Beith Murray