Comment: landlords must take action ahead of new green regulations

LAWS aimed at improving energy efficiency and cutting emissions are coming in later this year, writes Ken Gerber

Before selling or letting out a property, an action plan must be prepared by a qualified person. Picture: TSPL

A new law aimed at improving energy efficiency and reducing greenhouse gas emissions from property comes into force on 1 September. If you own non-residential property of more than 1,000 sq m (10,763.9 sq ft), the regulations affect you, whether the property is a self-contained building or part of a larger entity. The Assessment of Energy Performance of Non-Domestic Buildings (Scotland) Regulations 2016 will impose additional obligations in respect of the sale and lease of commercial properties. Different regulations will apply in England.

Some properties are exempt, including: properties improved under the Green Deal; workshops and non-residential agricultural buildings that have low energy demand; temporary buildings with a planned time of use of two years or shorter, and properties constructed to the standards set out in Schedule 5 to the Building (Scotland) Regulations 2004 and the Building Standard (Scotland) Regulations 1990 (which became effective on 4 March, 2002).

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Some transactions are also exempt, including the sale or lease of a property before construction has been completed and a lease of property for not more than 16 weeks and which cannot run beyond that time, provided that the property has not been let out during the previous 36 weeks.

Before selling or letting out a property, an “action plan” must be prepared by a qualified person, following an assessment of the property’s energy performance. The action plan must be available to prospective purchasers and tenants. It must contain a note of any measures to improve the energy performance of the property and to reduce emissions of greenhouse gases produced or associated with the property. It must also include the energy performance target and the emissions target, specify any recommended improvement measures for the property, and if there are none, this should be specified, and state whether or not operational rating measures are to be implemented in respect of the property and state the date of expiry of the compliance period.

The owner must complete any building improvement measures no later than 42 months from the date when the first action plan is issued, or if later by the date when no valid display energy certificate exists, provided that there has been a valid display energy certificate since the action plan was issued and the plan states that operational rating measures are to be implemented.

Any improvement measures in respect of heating controls, insulation and low energy lighting should only be recommended if they would result in energy saving of more than the cost of the works at the end of a seven-year period; it is not competent to require replacement of a boiler that is not more than 15 years old.

The owner is required to either make improvements to energy efficiency or to monitor and regularly report on energy consumption. When improvement measures have been carried out, the owner must arrange for an Energy Performance Certificate to be issued.

If the action plan states that improvements are to be carried out, the owner can defer doing these works up to and beyond the 42-month deadline, provided he complies with detailed monitoring and reporting requirements set out in the regulations.

Local authorities will enforce the regulations and impose a fixed penalty of £1,000 for breach. There is a right to have a penalty notice reviewed by the local authority, and after that a right to appeal to the Sheriff Court. There are some defences available, which include failure to obtain an action plan where a prospective tenant needs to take a lease in the case of emergency relocation. However, in such a case, the action plan must be obtained and given to the tenant as soon as reasonably practicable after the start of the lease.

• Ken Gerber is a partner in the commercial real estate department at Anderson Strathern